Document:

Exhibit 10.1

 

AGENCY AGREEMENT

 

February 22,
2006

 

U.S. Gold
Corporation

99 George Street

3rd Floor

Toronto, Ontario M5A 2N4

 

Attention:                                         Robert R. McEwen, Chairman
and Chief Executive Officer

 

Dear Sirs:

 

The
undersigned, GMP Securities L.P. and Griffiths McBurney Corp. (collectively,
the “Agent”), understands that
U.S. Gold Corporation (the “Company”)
proposes to issue and sell up to 11,200,000 subscription receipts
(individually, a “Subscription Receipt” and,
collectively, the “Subscription Receipts”)
having the terms described herein, at a price of US$4.50 per Subscription
Receipt (the “Issue Price”) for aggregate gross
proceeds to the Company of up to US$50,400,000.
Each Subscription Receipt shall be automatically converted, upon the occurrence
of the Release Conditions (as defined below), subject to adjustment and
dilution penalties in certain instances, and without payment of any further
consideration, into one unit of the Company (a “Unit”).
 Each Unit shall be comprised of one
share of common stock, no par value, of the Company (a “Unit Share”)
and one-half of one share purchase warrant of the Company (each whole share
purchase warrant being a “Warrant”). Each
Warrant will entitle the holder thereof to purchase one share (a “Warrant Share”) for a period of five years following the
Closing Date (as defined below) at a price of US$10.00.

 

The
Agent shall have an option (the “Agent’s Option”)
to sell up to 5,500,000 additional Subscription Receipts at the
Issue Price. The Agent’s Option shall be exercisable, in whole or in part at
the sole discretion of the Agent at any time until the Closing Time (as
hereinafter defined). The offering of
Subscription Receipts is hereinafter referred to as the “Offering”.
Unless the context otherwise requires, all references to the “Subscription Receipts” shall assume the exercise of the
Agent’s Option.

 

Upon and subject to the terms and conditions set forth
herein, the Agent hereby agrees to act, and upon acceptance hereof the Company
hereby appoints the Agent, as the Company’s exclusive agent to offer for sale
the Subscription Receipts on a “best efforts” agency basis, without underwriter
liability, at the Issue Price, and agrees to arrange for purchasers for the
Subscription Receipts resident in the Selling Jurisdictions (as hereinafter
defined).

 

The Subscription
Receipts will be issued pursuant to the provisions of a subscription receipt
agreement (the “Subscription Receipt
Agreement”) to be dated the date hereof among the Company, the Agent
and Equity Transfer Services Inc. (the “Transfer Agent”).
The specific attributes of the Subscription Receipts will be set forth in the
Subscription Receipt Agreement.   The
Subscription Receipt Agreement will otherwise be in such form and contain
such terms as approved by the Agent, the Company and their respective counsel. The
Purchasers (as

 

 

hereinafter defined),
Agent and other holders (including subsequent transferees) of the Subscription
Receipts (and any holders of Registrable Securities (as hereinafter defined)
will be entitled to the benefits of the registration rights agreement, to be
dated as of the Closing Date (the “Registration Rights Agreement”), among the
Company and the Agent, in the Form attached hereto as Exhibit A

 

In consideration of the services to be rendered by the
Agent in connection with the Offering, the Company shall pay to the Agent the
Commission (as hereinafter defined) and issue to the Agent the Compensation
Option as set out in section 15 hereof.

 

DEFINITIONS

 

In
this Agreement, in addition to the terms defined above, the following terms
shall have the following meanings:

 

“Act” means the Securities Act (Ontario);

 

“Affiliates” means the affiliates of
the Agent, as such term is defined in the Act;

 

“Agent” shall have the meaning
ascribed to such term on the face page of the Agreement;

 

“Agent’s
Option” shall have the meaning ascribed to such term on the face page of
the Agreement;

 

“Agreement” means the agreement
resulting from the acceptance by the Company of the offer made by the Agent
hereby;

 

“Broker Shares” means the Common Shares
issuable upon the due exercise of the Broker Warrants;

 

“Broker
Unit Warrants” means the
Warrants issuable upon the due exercise of the Broker Warrants;

 

“Broker
Unit Warrant Shares” means the
Common Shares issuable upon the due exercise of the Broker Unit Warrants;

 

“Broker Warrant” shall have the meaning
ascribed to such term in section 15
hereto;

 

“Broker Warrant Certificate” means the certificate
representing the Broker Warrants and containing the terms thereof;

 

“Business
Day” means a day which is not a Saturday, Sunday or statutory or civic
holiday in the City of Toronto, Ontario or the City of Denver, Colorado;

 

2

 

“Closing” means the closing on the Closing
Date of the transaction of purchase and sale in respect of the Subscription
Receipts as contemplated by this Agreement and the Subscription Agreements;

 

“Closing Date” means February 22,
2006 or such other date as the Agent and the Company may agree;

 

“Closing
Time” means 9:00 a.m. (Toronto time) on the Closing Date or such other
time on the Closing Date as the Company and the Agent may agree;

 

“Commission” shall have the meaning
ascribed to such term in section 15 hereof;

 

“Common Shares” means the shares of
common stock in the capital of the Company;

 

“Company”
means US Gold Corporation and includes any successor corporation to or of the
Company;

 

“Company’s Auditors” means Stark Winter
Schenkein & Co., LLP, or such other firm of chartered accountants as
the Company may have appointed or may from time to time appoint as
auditors of the Company;

 

“Compensation Option” shall have the meaning
ascribed to such term in section 15 hereto;

 

“Compensation Option Certificate” means the certificate
evidencing the Compensation Option and containing the terms thereof;

 

“Debt
Instrument” means any loan, bond, debenture, promissory note or other instrument
evidencing indebtedness (demand or otherwise) for borrowed money or other
liability;

 

“Disclosure Documents” means collectively, the
Corporation’s annual report on Form 10-KSB for the year ended December 31,
2004, and all subsequent documents filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14(a) or 15(d) of the Exchange Act
prior to the Closing Date, including the quarterly reports filed on Form 10-QSB
for the quarters ended March 31, 2005, June 30, 2005 and September 30,
2005, the current reports filed on Form 8-K since January 1, 2005 and
the proxy statement dated October 28, 2005;

 

“Environmental Laws” has the meaning ascribed in section 5 (a)(xxxi) hereof;

 

“Escrowed Funds” has the meaning attributed thereto in section 2(b) hereof;

 

“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended;

 

“Financial Statements” has the meaning
ascribed in section 5 (a)(vi) hereof;

 

“Final
Prospectus” means the Canadian (final) prospectus of the Company, qualifying the
distribution of the Unit Shares, the Warrants and the Broker Warrants in the
Qualifying Provinces;

 

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“Final Qualification Deadline” has the meaning attributed thereto in section 2(d) hereof;

 

“Final Receipt” means the receipt for the Final Prospectus issued by the securities
regulatory authorities in all Qualifying Provinces;

 

“including” means including without
limitation;

 

“Initial Qualification Deadline” has the meaning attributed
thereto in section 2(d) hereof;

 

“Institutional
Accredited Investor” means an institution that
is an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) and
(7) of the U.S. Securities Act;

 

“Investment Company Act” means the United States Investment Company
Act of 1940, as amended;

 

“Issue Price”
shall have the meaning ascribed to such term on the face page of the
Agreement;

 

“Leased
Premises” means all premises which are material to the Company and
which the Company or a Material Subsidiary occupies as tenant;

 

“Material
Agreement” means any material note, indenture, mortgage or other form of
indebtedness and any contract, commitment, agreement (written or oral),
instrument, lease or other document, including licence agreements and
agreements relating to intellectual property, to which the Company is a party
and which is material to the Company;

 

“Material Subsidiaries” shall have the meaning ascribed
thereto in section 5(a)(ii) hereof;

 

“MRRS”
means the mutual reliance review system procedures provided for under National
Policy 43-201 – Mutual Reliance Review System for Prospectuses and Annual
Information Forms;

 

“misrepresentation”,
“material fact”, “material change”, “subsidiary”, “affiliate”, “associate”, and “distribution” have the respective meanings ascribed thereto
in the Act or the U.S. Securities Act, as applicable;

 

“Offering” shall have the meaning
ascribed to such term on the face page of the Agreement;

 

“person” means any individual (whether acting as an executor,
trustee, administrator, legal representative or otherwise), corporation, firm,
partnership, sole proprietorship, syndicate, joint venture, trustee, trust,
unincorporated organization or association, and pronouns have a similar
extended meaning;

 

“Personnel” has the meaning ascribed in section 13 hereof;

 

“Preliminary
Prospectus” means the Canadian preliminary prospectus of the Company filed in
accordance with the MRRS;

 

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“Prospectus” shall mean,
collectively, the Preliminary Prospectus and the Final Prospectus;

 

“Purchasers” means the persons who,
as purchasers, acquire Subscription Receipts by duly completing, executing and
delivering Subscription Agreements and any other required documentation and
permitted assignees or transferees of such persons from time to time;

 

“Qualifying
Provinces” means the Provinces of Ontario and Quebec;

 

“Registration Rights Agreement”
shall have the meaning ascribed to such term on the face page of this
Agreement;

 

“Registration Statement”
means the registration statement of the Corporation to be filed with the SEC in
order to register, or register the resale of, the Registrable Securities, as
applicable, as such Registration Statement is amended from time to time;

 

“Registrable Securities”
means the Unit Shares, the Warrants, the Warrant Shares, the Broker Warrants,
the Broker Shares, the Broker Unit Warrants and the Broker Unit Warrant Shares;

 

“Regulation
D” means Regulation D under the U.S. Securities Act;

 

“Regulation
S” means Regulation S under the U.S. Securities Act;

 

“Release
Conditions” means the conditions to be satisfied prior to automatic
conversion of the Subscription Receipts, which shall be satisfied upon the
latest to occur of the following: (i) the third business day after the
date on which a Final Receipt has been issued; (ii) the completion and
filing via SEDAR of a current technical report regarding the Tonkin Springs
gold project that complies with National Instrument 43-101 – Standards of Disclosure for Mineral Projects
of the Canadian Securities Administrators; (iii) the Common Shares being
listed for trading on the Toronto Stock Exchange; (iv) the declaration by
the SEC of the effectiveness of the Registration Statement; and (v) the
delivery of a “10b-5” opinion, in customary form, addressed to the Agent,
satisfactory to the Agent, acting reasonably, provided by United States counsel
to the Corporation in respect of the Registration Statement;

 

“Remaining Subscription Receipts” has the meaning ascribed to such term in section 2(d) hereof;

 

“Rule 144”
means Rule 144 under the U.S. Securities Act;

 

“Rule 144A” means Rule 144A under the U.S. Securities Act;

 

“SEC”
means the United States Securities and Exchange Commission;

 

“Securities
Laws” means, as applicable, the securities laws, regulations, rules,
rulings and orders in the Selling Jurisdictions, the applicable policy
statements issued by the securities regulators in the Selling Jurisdictions,
the securities laws of the United States, any applicable States and any
jurisdictions outside of Canada and the United States, the regulations and rules thereunder
and the forms prescribed thereby and the rules of any applicable stock
exchange;

 

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“Securities Regulators” means the securities commissions or
other securities regulatory authorities of the Selling Jurisdictions, including
the SEC, or, as the context may require, any one or more of Selling
Jurisdictions;

 

“Selling
Jurisdictions” means the Provinces of Ontario and Quebec and such other jurisdictions
outside of Canada (including the United States) as may be agreed to by the
Agent and the Company as evidenced by the Company’s acceptance of a
Subscription Agreements with respect thereto;

 

“State”
means any one of the 50 states of the United States of America or the District
of Columbia;

 

“Subscription
Receipt Agreement” shall have the meaning ascribed to such term on the
face page of the Agreement;

 

“Subscription Receipt Certificates”
means the certificates to be issued to Purchasers evidencing the Subscription
Receipts purchased;

 

“Subscription
Receipts” shall have the meaning ascribed to such term on the face page of
the Agreement;

 

 “Subscription Agreements” means the subscription
agreements in the form agreed upon by the Agent and the Company pursuant
to which Purchasers agree to subscribe for and purchase the Subscription
Receipts herein contemplated and shall include, for greater certainty, all
schedules thereto;

 

“Supplementary
Material” means, collectively, any amendment to the Preliminary Prospectus, the
Final Prospectus, the Registration Statement, or any amended or supplemental
prospectus or ancillary material required to be filed with any of the
Securities Regulators pursuant to the Canadian Securities Laws;

 

“Taxes” shall have the meaning
ascribed thereto in section 5 (a)(viii);

 

“Transaction Documents”
means, collectively, this Agreement, the Subscription Agreements, the Registration
Rights Agreement, Subscription Receipt Agreement, the Warrant Indenture, the
Compensation Option Certificate and, if and when issued upon due exercise of
the Compensation Option, the Broker Warrant Certificates;

 

“Transfer
Agent” shall have the meaning ascribed to such term on the face page of
this Agreement;

 

“Unit”
shall have the meaning ascribed to such term on the face page of this
Agreement;

 

“Unit
Shares” shall have the meaning ascribed to such term on the face page of
this Agreement;

 

6

 

“United States” means the United States of America, its
territories and possessions, any state of the United States, and the District
of Columbia;

 

“U.S.
Securities Act” means the United States Securities Act of 1933, as amended;

 

“Warrant
Indenture”
means the warrant indenture dated as of the Closing Date between the Company
and the Transfer Agent, providing for the creation and issuance of the
Warrants;

 

“Warrant Shares” shall have the
meaning ascribed to such term on the face page of the Agreement; and

 

“Warrants” shall have the
meaning ascribed to such term on the face page of the Agreement;

 

“$” as used herein means dollars of the United States.

 

TERMS AND CONDITIONS

 

1.                                      (a)                                  Sale on
Exempt Basis. The Agent will offer
for sale and sell the Subscription Receipts in the Selling Jurisdictions on a “private
placement” basis in those jurisdictions where they may lawfully be offered
for sale or sold and only at the Issue Price. The Agent will offer the
Subscription Receipts to persons who it reasonably believes are Institutional
Accredited Investors, or “accredited investors” as defined in the Act, in
transactions which comply with the exemptions from registration or do not
require the filing of a prospectus or offering memorandum with respect to those
Subscription Receipts under the laws of any Selling Jurisdiction.

 

(b)                                  Filings. The Company undertakes to file or cause to be filed all forms or
undertakings required to be filed by the Company in the Selling
Jurisdictions in connection with the purchase and sale of the Subscription Receipts so
that the distribution of the Subscription Receipts and the issuance of the
Units may lawfully occur without the necessity of filing a prospectus, a
registration statement or an offering memorandum in Canada or the United States
(but on terms that will permit the Subscription Receipts and the Units acquired
by the Purchasers in the Selling Jurisdictions to be sold by such Purchasers at
any time in the Selling Jurisdictions subject to the terms of the Subscription
Receipt Agreement, this Agreement and applicable securities laws, including,
but not limited to, compliance with applicable hold periods), and the Agent
undertakes to cause Purchasers of Subscription Receipts to complete any forms
required by the Securities Laws. All fees payable in connection with such
filings shall be at the expense of the Company.

 

(c)                                  No
Offering Memorandum. Neither the Company nor the Agent shall: (i) provide
to prospective purchasers of the Subscription Receipts any document or other
material that would constitute an offering memorandum or future oriented
financial information within the meaning of Securities Laws in Canada or in the
United States or any State or territory thereof; or (ii) engage in any form of
general solicitation or general advertising in connection with the offer and
sale of the

 

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Subscription
Receipts, including, but not limited to, causing the sale of the Subscription
Receipts to be advertised in any newspaper, magazine, printed public media,
printed media or similar medium of general and regular paid circulation,
broadcast over radio, television or telecommunications, including electronic
display, or conduct any seminar or meeting relating to the offer and sale of
the Subscription Receipts whose attendees have been invited by general
solicitation or advertising.

 

2.                                    Description
of the Subscription Receipts.

 

(a)                                  The Subscription Receipts shall be
created and issued pursuant to the Subscription Receipt Agreement to be entered
into between the Transfer Agent, the Corporation and the Agent to be dated as
of the Closing Date. The specific attributes of the Subscription Receipts,
including the adjustment provisions, shall be set forth in the Subscription
Receipt Agreement.

 

(b)                                  On Closing, 50% of the gross
proceeds from the Offering will be delivered to and held by the Transfer Agent
and invested in short term investment grade debt obligations as agreed to by
the Corporation and the Agent. The funds held in escrow by the Transfer Agent,
together with all interest and other income earned thereon, are referred to
herein as the “Escrowed Funds”.

 

(c)                                  The Subscription Receipts will
convert into Units upon satisfaction of the Release Conditions, without any
action, including additional payment, required on the part of the holders
thereof. Upon the satisfaction of all of the Release Conditions, the Escrowed
Funds shall be released by the Transfer Agent to the Company.

 

(d)                                  If any of the Release Conditions
have not been satisfied on or prior to 5:00 p.m. (Mountain time) on that
date which is 183 days following the Closing Date, each Subscription Receipt
shall thereafter be convertible into 1.1 Unit Shares (in lieu of one Unit
Share) and 0.55 Warrants (in lieu of 0.5 Warrants). If any of the Release
Conditions have not been satisfied prior to 5:00 p.m. (Mountain time) on
that date that is twelve months following the Closing Date (the “Initial Qualification Deadline”), the Escrowed Funds shall
be returned by the Transfer Agent, on behalf of the Corporation, to the holders
of the Subscription Receipts in exchange for the delivery to the Corporation of
50% of the outstanding Subscription Receipts held by each holder. The remaining
50% of the Subscription Receipts not returned to the Company on the Initial
Qualification Deadline (the “Remaining Subscription
Receipts”) shall remain outstanding until the earlier of: (i) 18
months following the Closing Date (the “Final Qualification
Deadline”); and (ii) the satisfaction by the Company, or the
waiver by the Agent, of each of the Release Conditions. If any of the Release
Conditions have not been satisfied prior to 5:00 p.m. (Mountain time) on
the Final Qualification Deadline, the Remaining Subscription Receipts shall be
deemed to be exchanged into Units in accordance with the provisions of the
Subscription Receipt Agreement.

 

(e)                                  Upon the valid conversion of a
holder’s Subscription Receipts, the Transfer Agent will mail certificates
representing the Unit Shares and Warrants to the holder’s last address on
record with the Transfer Agent.

 

8

 

3.                                      (a)                                  Covenants.
The Company hereby covenants to the Agent and to the Purchasers and
their permitted assigns, and acknowledges that each of them is relying on such
covenants, that the Company shall:

 

(i)                                     promptly from time to
time take such action requested by the Agents to qualify the Subscription
Receipts, the Unit Shares and the Warrants for offering and sale under the
securities laws of such jurisdictions, by way of exceptions or exemptions from
the prospectus and registration requirements, as the Agent and the Company may agree
and to comply with such laws as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Subscription Receipts, provided that in connection
therewith the Company shall not be required, except as otherwise provided
herein, to file a prospectus or registration statement, to qualify as a foreign
corporation or to file a general consent to service in jurisdiction;

 

(ii)                                  allow the Agent and
their representatives the opportunity to conduct all due diligence which the
Agent may require to be conducted prior to (i) the Closing Time, and (ii) the
date of the Prospectus and the Registration Statement in order to fulfil their
obligations as Agent under Securities Laws and in order to enable the Agent to
execute any certificate required to be executed by the Agent in connection with
the Prospectus, and it shall be a condition precedent to the Agent’s execution
of any certificate in any Prospectus that they be satisfied, acting reasonably,
as to the form and content of such Prospectus;

 

(iii)                               duly execute and deliver
the Transaction Documents at the Closing Time, and comply with and satisfy all
terms, conditions and covenants therein contained to be complied with or
satisfied by the Company;

 

(iv)                              use its best efforts to
fulfil or cause to be fulfilled, at or prior to the Closing Date, each of the
conditions set out in section 9 hereof;

 

(v)                                 ensure that the
Subscription Receipts shall be duly and validly created, authorized and issued
and shall have the attributes corresponding in all material respects to the
description thereof set forth in this Agreement, the Subscription Receipt
Agreement and the Subscription Agreements;

 

(vi)                              ensure that, at all
times prior to the expiry of the Subscription Receipts, a sufficient number of
Unit Shares and Warrants are allotted, created and reserved for issuance, as
the case may be, upon the conversion of the Subscription Receipts;

 

(vii)                           ensure that the Unit
Shares, upon exercise or deemed exercise of the Subscription Receipts, shall be
duly issued as fully paid and non-assessable securities in the capital of the
Company, free of pre-emptive rights;

 

9

 

(viii)                        ensure that the Warrants
shall be duly and validly created, authorized and issued upon the exercise or
deemed exercise of the Subscription Receipts and shall have the attributes
corresponding in all material respects to the description thereof in this
Agreement and the Warrant Indenture;

 

(ix)                                ensure that, at all
times prior to the expiry of the Warrants, a sufficient number of Warrant
Shares, are allotted and reserved for issuance, and, upon exercise of the
Warrants, shall be duly issued as fully paid and non-assessable securities in
the capital of the Company;

 

(x)                                   ensure
that the Compensation Option shall be duly and validly created, authorized and
issued;

 

(xi)                                ensure that the Broker
Warrants shall be duly and validly created, authorized and issued upon the
exercise or deemed exercise of the Compensation Option and shall have the
attributes corresponding in all material respects to the description thereof in
this Agreement and the Compensation Option Certificate;

 

(xii)                             ensure
that, at all times prior to the expiry of the Broker Warrants, a sufficient
number of Broker Shares and Broker Unit Warrants are allotted, created and
reserved for issuance upon the due exercise of the Broker Warrants, as the case
may be and upon such due exercise, such Broker Shares and Broker Unit
Warrants shall be duly issued as fully paid and non-assessable securities in
the capital of the Company;

 

(xiii)                          ensure that, at all times
prior to the expiry of the Broker Unit Warrants, a sufficient number of Broker
Unit Warrant Shares are allotted and reserved for issuance, and,
upon exercise of the Broker Unit Warrants, shall be duly issued as fully paid
and non-assessable securities in the capital of the Company;

 

(xiv)                         use its commercially
reasonable efforts to satisfy the Release Conditions promptly following
Closing;

 

(xv)                            not
to issue, offer, sell, contract to sell or otherwise dispose of any additional
securities until the earlier to occur of: (I) the Final Qualification Deadline;
and (II) satisfaction of the Release Conditions, without the prior written
consent of the Agent, such consent not to be unreasonably withheld, except in
conjunction with: (A) the Offering and the conversion of the Subscription
Receipts or Broker Warrants for Unit Shares and Warrants, and the exercise of
the Warrants or Broker Unit Warrants; (B) the grant or exercise of stock
options and other similar issuances pursuant to the existing share incentive
plan of the Company and other existing share compensation arrangements; (C) outstanding
convertible securities as set forth in Schedule “B” hereto; (D) the
acquisition by the Company of any mineral properties, royalty interests or
other assets; (E) a business combination by the Company with another
company or entity; and (F) any obligations to issue securities existing at
the date of this Agreement;

 

10

 

(xvi)                         execute
and file with the Securities Regulators all forms, notices and certificates
required to be filed pursuant to the Securities Laws in the time required by
the applicable Securities Laws, including, not later
than 15 days after the Closing Date, file five copies of a notice on Form D
under the U.S. Securities Act (one of which will be manually signed by a person
duly authorized by the Company); to otherwise comply with the requirements of Rule 503
under the U.S. Securities Act; and to furnish promptly to the Agent evidence of
each such required timely filing (including a copy thereof);

 

(xvii)                      not to be or
become, at any time prior to the expiration of five years after the Closing
Time, an open-end investment company, unit investment trust, closed-end
investment company or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act;

 

(xviii)                   the Company
will comply with the U.S. Securities Act so as to permit the completion of the
distribution of the Subscription Receipts and the Unit Shares and Warrants
contemplated hereby and in the Transaction Documents. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act,
for the benefit of holders from time to time of Unit Shares, Warrants and
Warrant Shares, to furnish at its expense, upon request, to holders of such
securities and prospective purchasers of any such securities information
satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the U.S. Securities Act;

 

(xix)                           to furnish
to the holders of the Subscription Receipts, Unit Shares and Warrants, as soon
as practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders’ equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants), which requirement will be satisfied by the furnishing of the
Company’s Annual Report on Form 10-KSB (or any applicable successor
thereto under the Exchange Act), and, as soon as practicable after the end of
each of the first three quarters of each fiscal year (beginning with the fiscal
quarter ending March 31, 2006), consolidated summary financial information
of the Company and its subsidiaries for such quarter in reasonable detail,
which requirement will be satisfied by the furnishing of the Company’s
Quarterly Report on Form 10-QSB (or any applicable successor thereto under
the Exchange Act);

 

(xx)                              the
Registration Statement and the Prospectus and any amendments or supplements
thereto, and the Disclosure Documents did not and will not, as of their
respective dates, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Agent;

 

11

 

(xxi)                           the Company
will timely file such reports pursuant to the Exchange Act as are necessary in
order to make generally available to its securityholders as soon as practicable
an earnings statement for the purposes of, and to provide the Agent the
benefits contemplated by, the last paragraph of Section 11(a) of the
U.S. Securities Act; and

 

(xxii)                        the Company
will use its commercially reasonable efforts to effect the listing of the
Common Shares on the Toronto Stock Exchange, promptly after Closing.

 

(b)                                  The
Agent hereby covenants and agrees to conduct their activities in connection
with the sale of the Subscription Receipts in compliance with all applicable
laws and to obtain from each Purchaser a completed and executed Subscription
Agreement (including all certifications, forms and other documentation
contemplated thereby or as may be required by applicable Securities
Regulators) in a form acceptable to the Company and the Agent relating to
the Offering.

 

4.                                  Material Changes During
Offering. The Company will promptly notify the Agent in writing until the
earlier of (i) the Final Qualification Deadline; and (ii) satisfaction
of the Release Conditions:

 

(a)                                  if the Company becomes aware of any material fact not previously
disclosed, any material change or change in a material fact (in either case,
whether actual, anticipated, contemplated or threatened and other than a change
of fact relating solely to the Agent) or any event or development involving a
prospective material change or change in a material fact in any or all of the
business of the Company and its subsidiaries, taken as a whole, or any other
change which is of such a nature as to result in, or could result in, the
Disclosure Documents, Preliminary Prospectus, the Final Prospectus, any
Supplementary Material or the Registration Statement (and any amendment or
supplement thereto) containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or which could render any of the foregoing not
in compliance with any Securities Laws;

 

(b)                                with full particulars of any such actual, anticipated, contemplated,
threatened or prospective change of which it becomes aware referred to in the
first preceding paragraph and the Company will, to the reasonable satisfaction
of the Agent, issue or file, as applicable, promptly and, in any event, within
all applicable time limitation periods with the Securities Regulators, in the
case of a material adverse change, a new or amended Preliminary Prospectus,
and, in the case of a material change, a new or amended Final Prospectus or
Supplementary Material or Registration Statement, as the case may be, or
press release, material change report or Current Report on Form 8-K as may be
required under Securities Laws and shall comply with all other applicable
filing and other requirements under the Securities Laws including, without
limitation, any requirements necessary to register with the SEC or qualify the
issuance and distribution of the Unit Shares and Warrants comprising the Units,
as the case may be. The Company shall not file any such new or amended
disclosure documentation without first notifying the Agent, and shall not issue
or file, as applicable any press release, material change

 

12

 

report or
Current Report on Form 8-K without giving the Agent and its counsel an
opportunity for review of the proposed forms;

 

(c)                                will in good faith discuss with the Agent as promptly as possible
any circumstance or event which is of such a nature that there is or ought to
be consideration given as to whether there may be a material change or
change in a material fact described in paragraphs (a) and (b) above;

 

(d)                                  subject to applicable
law, the Company shall consult with the Agent as to the content and form of
any press release.

 

(e)                                  Change in Securities Laws. If during the period of distribution of the Unit
Shares and Warrants comprising the Units or during the time that the
Registration Statement is outstanding, there shall be any change in Securities
Laws or other applicable securities laws which in the opinion of counsel to the
Company or counsel to the Agent requires the filing of Supplementary Material,
the Company shall, to the satisfaction of its counsel and the Agent’s counsel,
promptly prepare and file such Supplementary Material with the appropriate
securities regulatory authority in each of the Qualifying Provinces where such
filing is required, or file an amendment to the Registration Statement, as the
case may be

 

5.                                  (a)                            Representations
and Warranties of the Company. The Company represents and warrants to the Agent and
to the Purchasers, and acknowledges that each of them is relying upon such
representations and warranties, that, subject to the exceptions noted in Schedule “B”:

 

(i)                                                             the Company and the
Material Subsidiaries (as hereinafter defined) have been duly incorporated and
are in good standing under the laws of their respective jurisdictions, and are
current and up-to-date with all filings required to be made by them in such
jurisdiction, have all requisite corporate power and authority and are duly
qualified and possess all certificates, authorizations, permits and licences
issued by the appropriate provincial, municipal, federal regulatory agencies or
bodies necessary (and has not received or is aware of any modification or
revocation to such licences, authorizations, certificates or permits) to carry
on its business as now conducted and to own its properties and assets and the
Company and the Material Subsidiaries have all requisite corporate power and
authority to carry out their obligations under the Transaction Documents;

 

(ii)                                                          the Company
has no material subsidiaries other than as listed below (the “Material Subsidiaries”) and the Company beneficially owns,
directly or indirectly, the percentage indicated below of the issued and
outstanding shares in the capital of the Material Subsidiaries free and clear
of all mortgages, liens, charges, pledges, security interests, encumbrances,
claims or demands of any kind whatsoever, all of such shares have been duly
authorized and validly issued and are outstanding as fully paid and non-assessable
shares and no person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming a right, agreement or
option, for the purchase from the Company of any interest in any of such shares
or for the issue or allotment of any

 

13

 

unissued
shares in the capital of the Material Subsidiaries or any other security
convertible into or exchangeable for any such shares:

 

	
  Name

  	
   

  	
  Jurisdiction of

  Incorporation or

  Continuance

  	
   

  	
  Beneficial

  Equity/Voting

  Ownership

  	
   

  
	
  U.S.
  Environmental Corporation

  	
   

  	
  Colorado

  	
   

  	
  100

  	
  %

  
	
  Tonkin
  Springs Gold Mining Corporation

  	
   

  	
  Colorado

  	
   

  	
  100

  	
  %

  

 

(iii)                                                       all consents, approvals,
permits, authorizations or filings as may be required for the execution
and delivery of the Transaction Documents, the issuance and sale of the
Subscription Receipts, the issuance of the Unit Shares and Warrants upon the
conversion of the Subscription Receipts, the issue and sale of the Warrant
Shares upon the exercise of the Warrants, the issuance of the Compensation
Option, the issuance of the Broker Warrants upon exercise or deemed exercise of
the Compensation Option, the issue and sale of the Broker Shares and Broker
Unit Warrants upon the exercise of the Broker Unit Warrants, the issue and sale
of the Broker Unit Warrant Shares upon the exercise of the Broker Warrants, all
in conformance with this Agreement, and the consummation of the transactions
contemplated in this Agreement, have been made or obtained, as applicable,
except for the filing of the notification on Form D with the SEC required
to be made within 15 days of closing;

 

(iv)                                                      each of the execution
and delivery of the Transaction Documents, the performance by the Company of
its obligations hereunder or thereunder, the issuance and sale of the
Subscription Receipts, the issuance of the Unit Shares and Warrants upon
exercise or deemed exercise of the Subscription Receipts, the issue and sale of
the Warrant Shares upon the exercise of the Warrants, the issuance of the
Compensation Option, the issuance of the Broker Warrants upon exercise or
deemed exercise of the Compensation Option, the issue and sale of the Broker
Shares and Broker Unit Warrants upon the exercise of the Broker Warrants, the
issue and sale of the Broker Unit Warrant Shares upon the exercise of the
Broker Unit Warrants, and the consummation of the transactions contemplated in
this Agreement, do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
(whether after notice or lapse of time or both), (A) any statute, rule or
regulation applicable to the Company including, without limitation, Securities
Laws or other applicable securities laws; (B) the constating documents, articles
or resolutions of the Company which are in effect at the date hereof; (C) any
Debt Instruments, Material Agreement, mortgage, note, indenture, contract,
agreement, instrument, lease or other document to which the Company is a party
or by which it is bound; or (D) any judgment, decree order, statute, rule,
law or regulation binding the Company or the property or assets of the Company;

 

14

 

(v)                                                         The Disclosure Documents, when they
were or are filed with the SEC, conformed or will conform in all material
respects to the applicable requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder and when read together did not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;

 

(vi)                                                      the audited financial
statements of the Company as at and for the year ended December 31, 2004
and unaudited interim financial statements as at and for the nine month period
ended September 30, 2005 (collectively, the “Financial Statements”) have been prepared in accordance with
generally accepted accounting principles in the United States, as applicable,
consistently applied with prior periods, except as otherwise noted therein and
present fairly, in all material respects, the financial position (including the
assets and liabilities, whether absolute, contingent or otherwise) of the
Company as at such dates and results of operations of the Company for the
periods then ended and there has been no material change in accounting policies
or practices of the Company or the Material Subsidiaries since December 31,
2004. All disclosures in the Disclosure Documents regarding “non-GAAP financial
measures” (as such term is defined by the rules and regulations of the
SEC) comply with Regulation G, to the extent applicable;

 

(vii)                                                   there has been no
adverse material change to the Company or the Material Subsidiaries (actual,
proposed or prospective, whether financial or otherwise) in the business,
affairs, operations, assets, liabilities (contingent or otherwise) or
shareholders’ equity of the Company or the Material Subsidiaries since December 31,
2004, which has not been generally disclosed to the public and, in all material
respects, the business of the Company and the Material Subsidiaries have been
carried on in the usual and ordinary course consistent with past practice since
December 31, 2004 to the extent that such past practice is consistent with
the current business direction of the Company and the Material Subsidiaries;

 

(viii)                                                all taxes (including
income tax, capital tax, payroll taxes, employer health tax, workers’
compensation payments, property taxes, custom and land transfer taxes), duties,
royalties, levies, imposts, assessments, deductions, charges or withholdings
and all liabilities with respect thereto including any penalty and interest
payable with respect thereto (collectively, “Taxes”)
due and payable or required to be collected or withheld and remitted, by the
Company and the Material Subsidiaries have been paid, collected or withheld and
remitted, as applicable. All tax returns, declarations, remittances and filings
required to be filed by the Company and the Material Subsidiaries have been
filed with all appropriate governmental authorities and all such returns,
declarations, remittances and filings are complete and accurate and no material
fact or facts have been omitted therefrom which would make any of them misleading.
No examination of any tax return of the Company or the Material Subsidiaries is
currently in progress and there are no issues or disputes outstanding with any

 

15

 

governmental
authority respecting any taxes that have been paid, or may be payable, by
the Company and the Material Subsidiaries. There are no agreements, waivers or
other arrangements with any taxation authority providing for an extension of
time for any assessment or reassessment of taxes with respect to the Company
and the Material Subsidiaries;

 

(ix)                                                        the auditors who audited
the Financial Statements of the Company and the Material Subsidiaries for the
year ended December 31, 2004 and the year ended December 31, 2003 and
who provided their audit report thereon are independent public accountants as
required under the U.S. Securities Act and the Exchange Act;

 

(x)                                                           the Company’s auditors
have not provided any material comments or recommendations to the Company
regarding its accounting policies, internal control systems or other accounting
or financial practices;

 

(xi)                                                        there has never been a “reportable
event” (within the meaning of National Instrument 51-102) with the present or
former auditors of the Company;

 

(xii)                                                     except as set forth in Schedule “A”
to this Agreement, no holder of outstanding securities of the Company will be
entitled to any pre-emptive or any similar rights to subscribe for any of the
Common Shares or other securities of the Company and no rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, any
shares in the capital of the Company are outstanding. Other than the holders of
the Subscription Receipts there are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the U.S.
Securities Act;

 

(xiii)                                                  there
is not, in its articles or incorporation, by-laws or in any Debt Instrument,
Material Agreement, agreement, mortgage, note, debenture, indenture or other
instrument or document to which the Company or the Material Subsidiaries is a
party, any restriction upon or impediment to, the declaration or payment of
dividends by the directors of the Company or the payment of dividends by the
Company to the holders of its Common Shares;

 

(xiv)                                                 neither
the Company nor any of its subsidiaries are a party to or bound or affected by
any commitment, agreement or document containing any covenant which expressly
limits the freedom of the Company or the Company’s subsidiaries to compete in
any line of business, transfer or move any of its assets or operations or which
materially or adversely affects the business practices, operations or condition
of the Company and the Company’s subsidiaries taken as a whole;

 

(xv)                                                    the
Company and the Material Subsidiaries have conducted and are conducting their
business in compliance in all material respects with all applicable laws and
regulations of each jurisdiction in which it holds assets or carries on business

 

16

 

(including, without limitation, all applicable
federal, provincial, municipal, local environmental anti-pollution and
licensing laws, regulations and other lawful requirements of any Canadian, United
States or foreign governmental or regulatory body including exploration and
exploitation permits and concessions) and has not received a notice of
non-compliance, nor knows of, nor has reasonable grounds to know of, any facts
that could give rise to a notice of non-compliance with any such laws,
regulations or permits;

 

(xvi)                                                 the
Company and the Material Subsidiaries are not aware of any pending change or
contemplated change to any applicable law or regulation or governmental
position that would materially effect the business of the Company or the
Material Subsidiaries or the business or legal environment under which the
Company or the Material Subsidiaries operate;

 

(xvii)                                              this Agreement has been
duly authorized, executed and delivered by the Company and constitutes a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms;

 

(xviii)                                           upon the execution and
delivery thereof, each of the Transaction Documents shall constitute a valid
and binding obligation of the Company and each shall be enforceable against the
Company in accordance with its terms;

 

(xix)                                                   at the Closing Time, all
necessary corporate action will have been taken by the Company to: (a) validly
create, authorize and issue the Subscription Receipts; (b) allot, reserve
and authorize the issuance of the Unit Shares as fully paid and non-assessable
securities in the capital of the Company upon the exercise or deemed exercise
of the Subscription Receipts; (c) validly create, allot and authorize the
issuance of the Warrants upon the exercise or deemed exercise of the
Subscription Receipts; (d) validly allot, reserve and authorize the
issuance of the Warrant Shares upon the payment therefor as fully paid
non-assessable securities in the capital of the Company upon the exercise of
the Warrants; (e) validly create, allot and authorize the issuance of the
Compensation Option; (f) validly create, allot and authorize the issuance
of the Broker Warrants upon the exercise or deemed exercise of the Compensation
Option; (g) validly allot, reserve and authorize the issuance of the
Broker Shares upon the payment therefor as fully paid non-assessable securities
in the capital of the Company upon the exercise of the Broker Warrants; (h) validly
create, allot and authorize the issuance of the Broker Unit Warrants upon the
exercise of the Broker Warrants; and (i) validly allot, reserve and
authorize the issuance of the Broker Unit Warrant Shares upon the payment
therefor as fully paid non-assessable securities in the capital of the Company
upon the exercise of the Broker Unit Warrants;

 

(xx)                                                      as of the close of
business on February 21,
2006, the authorized capital of the Company consists of 250,000,000 Common
Shares of which 33,296,755 Common Shares are issued
and outstanding as fully paid and non-assessable;

 

17

 

(xxi)                                                   the
currently issued and outstanding Common Shares currently trade on the
Over-the-Counter market and are quoted in the Bulletin Board system maintained
by the National Association of Securities Dealers, Inc. and no order
ceasing or suspending trading in any securities of the Company or the trading
of any of the Company’s issued securities is currently outstanding and no
proceedings for such purpose are, to the knowledge of the Company, pending or
threatened;

 

(xxii)                                                other than in connection with transferring the listing
of the Common Shares to the American Stock Exchange or the NASDAQ Market, Inc.
the Company shall not take any action which would be reasonably expected to
result in the delisting or suspension of its Common Shares on the Over-the-Counter
Bulletin Board system or
from any other securities exchange, market or trading or quotation facility on
which its Common Shares become listed or quoted (including the Toronto Stock
Exchange) and the Company shall comply, in all material respects, with the rules and
regulations thereof;

 

(xxiii)                                             all information which
has been prepared by the Company relating to the Company and the Material
Subsidiaries and their respective business, property and liabilities and either
publicly disclosed or provided to the Agent, including all financial,
marketing, sales and operational information provided to the Agent and all
Disclosure Documents did not and will not contain a misrepresentation
or an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;

 

(xxiv)                                            the Company and the
Material Subsidiaries are not party to any agreement, nor is the Company or the
Material Subsidiaries aware of any agreement, which in any manner affects the
voting control of any of the securities of the Company or the Material
Subsidiaries;

 

(xxv)                                               other than the
notification filing on Form D required to be filed with the SEC 15 days
after the Closing Date, all filings required to be made by the Company and the
Material Subsidiaries pursuant to the Securities Laws and general corporate law
applicable to them have been made and such filings were true and accurate as at
the respective dates thereof and the Company has not filed any confidential
material change reports;

 

(xxvi)                                            the Company and the
Material Subsidiaries are in compliance with all laws respecting employment and
employment practices, terms and conditions of employment, occupational health
and safety, pay equity and wages; and there is not currently any labour
disruption or conflict involving the Company or the Material Subsidiaries;

 

(xxvii)                                         the Company and the
Material Subsidiaries do not have any loans or other indebtedness outstanding
which has been made to any of its shareholders, officers, directors or
employees, past or present, or any person not dealing at “arm’s length” (as
such term is defined in the Income Tax Act
(Canada)) with it;

 

18

 

(xxviii)                                      the assets of the
Company and the Material Subsidiaries and their respective business and
operations are insured against loss or damage with responsible insurers on a
basis consistent with insurance obtained by reasonably prudent participants in
comparable businesses, and such coverage is in full force and effect, and the
Company and the Material Subsidiaries have not breached the terms of any
policies in respect thereof or failed to promptly give any notice or present
any material claim thereunder;

 

(xxix)                                              other
than the Agent and its representatives, there are no persons acting or
purporting to act at the request or on behalf of the Company, that are entitled
to any brokerage or finder’s fee in connection with the transactions
contemplated by this Agreement;

 

(xxx)                                                 the
Company and the Material Subsidiaries are in compliance in all respects with
each license and permit held by it and is not in violation of, or in default
under, the applicable statutes, ordinances, rules, regulations, orders or
decrees (including, without limitation, “Environmental
Laws” as defined below) of any Canadian governmental entities,
regulatory agencies or bodies having asserting or claiming jurisdiction over it
or over any part of its operations or assets;

 

(xxxi)                                              the
Company and the Material Subsidiaries (i) are in compliance with any and
all applicable federal, provincial, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) in each jurisdiction
in which they hold assets or conduct business; (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct its business; and (iii) are in compliance
with all terms and conditions of any such permit, license or approval;

 

(xxxii)                                           there
are no known environmental audits, evaluations, assessments, studies or tests
relating to the Company or any of the Material Subsidiaries except for ongoing
assessments conducted by or on behalf of the Company in the ordinary course;

 

(xxxiii)                                        there
have been no past unresolved, and there are no pending or threatened claims,
complaints, notices or requests for information received by the Company or the
Material Subsidiaries with respect to any alleged violation of any
Environmental Law; and no conditions exist at, on or under any property now or
previously owned, operated or leased by the Company or the Material
Subsidiaries which, with the passage of time, or the giving of notice or both,
would give rise to liability under any Environmental Law that, individually or
in the aggregate, has or may reasonably be expected to have, an adverse
effect with respect to the Company or the Material Subsidiaries;

 

19

 

(xxxiv)                                       the
Company and/or the Material Subsidiaries are not party to any Debt Instrument
or any agreement, contract or commitment to create, assume or issue any Debt
Instrument or other indebtedness;

 

(xxxv)                                          other
than the Company, there is no person that is or will be entitled to demand the
proceeds of this Offering under the terms of any Debt Instrument, Material
Agreement, mortgage, note, indenture, contract, instrument, lease agreement
(written or unwritten) or otherwise;

 

(xxxvi)                                       the
Company and the Material Subsidiaries are not, nor to the knowledge of the
Company, any other person is not in default in the observance or performance of
any term, covenant or obligation to be performed by it under any Debt
Instrument, Material Agreement, contract, agreement or arrangement to which the
Company is a party and no event has occurred which with notice or lapse of time
or both would constitute such a default and all such contracts, agreements and
arrangements are in good standing;

 

(xxxvii)                                    the
minute books and records of the Company and the Material Subsidiaries which
have made available to the Agent and its counsel in connection with its due
diligence investigation of the Company and the Material Subsidiaries for the
periods from its inception date to the date of examination thereof, are all of
the minute books and material records of the Company and the Material
Subsidiaries and contain copies of all material proceedings (or certified
copies thereof) of the shareholders, the boards of directors and all committees
of the boards of directors of the Company and the Material Subsidiaries to the
date of review of such corporate records and minute books. There have been no
other material meetings, resolutions or proceedings of the shareholders, boards
of directors or any committees of the boards of directors of the Company and
the Material Subsidiaries to the date of review of such corporate records and
minute books not reflected in such minute books and other records or provided
to the Agent and its counsel;

 

(xxxviii)                                 with
respect to each of the Leased Premises, the Company and/or the Material
Subsidiaries occupy the Leased Premises, have the exclusive right to occupy and
use the Leased Premises and each of the leases pursuant to which the Company
and the Material Subsidiaries occupy the Leased Premises is in good standing
and in full force and effect. The performance of obligations pursuant to and in
compliance with the terms of this Agreement and the completion of the
transactions described herein by the Company and the Material Subsidiaries,
will not afford any of the parties to such leases or any other person the right
to terminate such lease or the Company’s or the Material Subsidiary’s right to
occupy and use the Leased Premises or, result in any additional or more onerous
obligations under such leases;

 

(xxxix)                                         the Company or the
Material Subsidiaries are the absolute legal and beneficial owner of, and have
good and marketable title to, all of the material property or

 

20

 

assets thereof to
the extent described in the Disclosure Documents, free of all mortgages, liens,
charges, pledges, security interests, encumbrances, claims or demands
whatsoever, other than those described in the Disclosure Documents, and no
other property rights are necessary for the conduct of the business of the
Company or the Material Subsidiaries as currently conducted or contemplated to be
conducted, the Company and the Material Subsidiaries know of no claim or basis
for any claim that might or could adversely affect the right thereof to use,
transfer or otherwise exploit such property rights and except as disclosed in
the Disclosure Documents, the Company and the Material Subsidiaries have no
responsibility or obligation to pay any commission, royalty, licence fee or
similar payment to any person with respect to the property rights thereof;

 

(xl)                                                        the Company and the
Material Subsidiaries hold either freehold title, mining leases, mining claims
or other conventional property, proprietary or contractual interests or rights,
recognized in the jurisdiction in which a particular property is located in
respect of the ore bodies and minerals located in properties in which the
Company and the Material Subsidiaries have an interest as described in the
Disclosure Documents under valid, subsisting and enforceable title documents or
other recognized and enforceable agreements or instruments, which are currently
sufficient to permit the Company and the Material Subsidiaries to explore the
minerals relating thereto, all such property, leases or claims and all
property, leases or claims in which the Company or the Material Subsidiaries
have any interest or right have been validly located and recorded in accordance
with all applicable laws and are valid and subsisting, the Company or the
Material Subsidiaries currently have all necessary surface rights, access
rights and other necessary rights and interest relating to the properties in
which the Company or the Material Subsidiaries have an interest as described in
the Disclosure Documents granting the Company or the Material Subsidiaries the
right and ability to explore for minerals, ore and metals for development
purposes as are appropriate in view of the rights and interests therein of the
Company or the Material Subsidiaries, with only such exceptions as do not
materially interfere with the use made by the Company or the Material
Subsidiaries of the rights or interests so held and each of the proprietary
interests or rights and each of the documents, agreements and instruments and
obligations relating thereto referred to above are currently in good standing
in the name of the Company or the Material
Subsidiaries;

 

(xli)                                                     any and all of the
agreements and other documents and instruments pursuant to which the Company
and the Material Subsidiaries hold their property and assets (including any
interest in, or right to earn an interest in, any property) are valid and
subsisting agreements, documents or instruments in full force and effect,
enforceable in accordance with the terms thereof, the Company and the Material
Subsidiaries are not in default of any of the material provisions of any such
agreements, documents or instruments nor has any such default been alleged, and
such properties and assets are in good standing under the applicable statutes
and regulations of the jurisdictions in which they are situated, and there has
been no

 

21

 

	
   

  	
   

  	
  default under
  any lease, licence or claim pursuant to which the Company or the Material
  Subsidiaries derives an interest in such property or assets and all taxes
  required to be paid with respect to such properties and assets to the date
  hereof have been paid. The interests of the Company or the Material
  Subsidiaries in, or rights of the Company or the Material Subsidiaries to
  earn an interest in, any property of the Company or the Material Subsidiaries
  are not subject to any right of first refusal or purchase or acquisition
  rights other than as described in the Disclosure Documents;

  
	
   

  	
   

  	
   

  
	
  (xlii)

  	
   

  	
  the Company has
  disclosed all material information relating to the Tonkin Springs gold
  project in the Disclosure Documents in compliance with Securities Laws and
  such disclosure is true and complete and accurate in all material respects;

  
	
   

  	
   

  	
   

  
	
  (xliii)

  	
   

  	
  the Company’s
  only material mineral property are the mining claims comprising the Tonkin
  Springs gold project as set forth in the title opinion dated the date hereof
  of Erwin & Thompson LLP;

  
	
   

  	
   

  	
   

  
	
  (xliv)

  	
   

  	
  all mineral
  exploration activities conducted by the Company and the Material Subsidiaries
  since the acquisition of their mineral properties has been conducted in
  accordance with good mining and engineering practices and all applicable
  workers’ compensation, health and safety and workplace laws, regulations and
  policies have been complied with in all material respects;

  
	
   

  	
   

  	
   

  
	
  (xlv)

  	
   

  	
  other than as described in the Disclosure
  Documents, there are no actions, suits, proceedings or inquiries pending or,
  to the knowledge of the Company or the Material Subsidiaries, threatened
  against or affecting the Company or the Material Subsidiaries or their
  property or assets at law or in equity or before or by any federal,
  provincial, municipal or other governmental department, commission, board,
  bureau, agency or instrumentality;

  
	
   

  	
   

  	
   

  
	
  (xlvi)

  	
   

  	
  there
  are no judgments against the Company or the Material Subsidiaries which are
  unsatisfied, nor are there any consent decrees or injunctions to which the
  Company or the Material Subsidiaries are subject;

  
	
   

  	
   

  	
   

  
	
  (xlvii)

  	
   

  	
  the Transfer
  Agent, at its principal offices in the City of Toronto, Ontario has
  been duly appointed as transfer agent and registrar in respect of the Common
  Shares and as agent and escrow agent in respect of the Subscription Receipts;

  
	
   

  	
   

  	
   

  
	
  (xlviii)

  	
   

  	
  no proceedings
  have been taken, instituted or, to the knowledge of the Company, are pending
  for the dissolution or liquidation of the Company or the Material
  Subsidiaries;

  
	
   

  	
   

  	
   

  
	
  (xlix)

  	
   

  	
  None
  of the transactions contemplated by this Agreement including, without
  limitation, the use of the proceeds from the sale of the Securities will
  violate or result in a violation of Section 7 of the Exchange Act, or
  any regulation

  

 

22

 

	
   

  	
   

  	
  promulgated
  thereunder, including, without limitation, Regulations G, T, U, and X of the
  Board of Governors of the Federal Reserve System;

  
	
   

  	
   

  	
   

  
	
  (l)

  	
   

  	
  There
  is and has been no failure on the part of the Company or any of the
  Company’s directors or officers, in their capacities as such, to comply in
  all material respects with any applicable provision of the Sarbanes-Oxley Act
  of 2002 and the rules and regulations promulgated in connection
  therewith, including Section 402 related to loans and Sections 302 and
  906 related to certifications;

  
	
   

  	
   

  	
   

  
	
  (li)

  	
   

  	
  Prior
  to the date hereof, neither the Company nor any of its affiliates has taken
  any action which is designed to or which has constituted or which might have
  been expected to cause or result in stabilization or manipulation of the
  price of any security of the Company in connection with the offering of the
  Subscription Receipts;

  
	
   

  	
   

  	
   

  
	
  (lii)

  	
   

  	
  The
  Company is subject to Section 13 or 15(d) of the Exchange Act;

  
	
   

  	
   

  	
   

  
	
  (liii)

  	
   

  	
  The
  Company is not, and after giving effect to the offering and sale of the
  Subscription Receipts, will not be an “investment company”, or an entity
  “controlled” by an “investment company”, as such terms are defined in the
  Investment Company Act;

  
	
   

  	
   

  	
   

  
	
  (liv)

  	
   

  	
  Assuming
  compliance with the terms of the Subscription Agreement, and this Agreement,
  neither the Company nor any person acting on its behalf has offered or sold
  the Subscription Receipts (or any securities issuable on conversion thereof)
  by means of any general solicitation or general advertising within the
  meaning of Rule 502(c) under the U.S. Securities Act or, with
  respect to Subscription Receipts (or any such securities) sold outside the
  United States to non-U.S. persons (as defined in Rule 902 under the U.S.
  Securities Act), by means of any directed selling efforts within the meaning
  of Rule 902 under the U.S. Securities Act and the Company, any affiliate
  of the Company and any person acting on its or their behalf has complied with
  and will implement the offering restriction requirements of Rule 902
  under the U.S. Securities Act;

  
	
   

  	
   

  	
   

  
	
  (lv)

  	
   

  	
  The Company and
  each of the Material Subsidiaries maintains a system of internal accounting
  controls sufficient to provide reasonable assurances that (A) transactions
  are executed in accordance with management’s general or specific
  authorization; (B) transactions are recorded as necessary to permit
  preparation of financial statements in conformity with U.S. GAAP and to
  maintain accountability for assets; (C) access to assets is permitted
  only in accordance with management’s general or specific authorization; and
  (D) the recorded accountability for assets is compared with the existing
  assets at reasonable intervals and appropriate action is taken with respect
  to any differences. Since December 31, 2004, there has been (1) no
  material weakness in the Company’s internal control over financial reporting
  (whether or not remediated) and (2) no

  

 

23

 

change in the
Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
controls over financial reporting.

 

(b)                                  Representations,
Warranties and Covenants of the Agent. The Agent hereby represents,
warrants and covenants to the Company, and acknowledge that the Company is
relying upon such representations and warranties, that:

 

(i)                                     in respect of the offer
and sale of the Subscription Receipts, the Agent will comply with all
Securities Laws of the jurisdictions in which it offers Subscription Receipts;

 

(ii)                                  the Agent and its
representatives have not engaged in or authorized, and will not engage in or
authorize, any form of general solicitation or general advertising in
connection with or in respect of the Subscription Receipts in any newspaper,
magazine, printed media of general and regular paid circulation or any similar
medium, or broadcast over radio or television or otherwise or conducted any
seminar or meeting concerning the offer or sale of the Subscription Receipts
whose attendees have been invited by any general solicitation or general
advertising;

 

(iii)                               the
Agent is an “accredited investor” as such term is defined in National
Instrument 45-106 -  Prospectus
and Registration Exemptions.

 

6.                                    Prospectus and Registration Statement Matters

 

	
  (a)

  	
   

  	
  The
  Company will use its commercially reasonable efforts to cause the Preliminary
  Prospectus and any other related documents required to be filed in connection
  with the Preliminary Prospectus to be prepared and filed in accordance with
  the Securities Laws of the Qualifying Provinces, as soon as practicable after
  the Closing Date, in each case in form and substance satisfactory to the
  Agent acting reasonably. The Company will use its commercially reasonable
  efforts to satisfy as expeditiously as possible any comments made by any of
  the Securities Regulators in respect of the Preliminary Prospectus;

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  The
  Company will use its commercially reasonable efforts to obtain, as soon as
  possible, a Final Receipt from each of the Securities Regulators in the
  Qualifying Provinces for the Final Prospectus and will take all other steps
  and proceedings that may be necessary in order to qualify the Unit
  Shares, Warrants and Broker Warrants for distribution in each of the
  Qualifying Provinces as practicable and, in any event, no later than 5:00 p.m.
  (Toronto time) on the Final Qualification Deadline;

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  The Company will use its commercially
  reasonable efforts, promptly following the Closing but no later than March 31,
  2006, to prepare and file with the SEC the Registration Statement on
  Form S-1 or SB-2 (or, if Form S-1 or SB-2 is not then

  

 

24

 

	
   

  	
   

  	
  available to the Company, on such form of
  registration statement as is then available) to effect a registration
  covering the resale of the Registrable Securities in an amount at least equal
  to the aggregate of the Registrable Securities. The Registration Statement
  also shall cover, to the extent allowable under the U.S. Securities Act and
  the rules promulgated thereunder (including Rule 416), such
  indeterminate number of additional shares of common stock of the Company
  resulting from stock splits, stock dividends or similar transactions with
  respect to the Registrable Securities. The Company shall use its commercially reasonable efforts to have the Registration Statement declared
  effective by the SEC as soon as practicable and, in any event, no later than
  5:00 p.m. (Toronto time) on the Final Qualification Deadline

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Prior
  to the filing of the Preliminary Prospectus, the Final Prospectus, any
  Supplementary Material and the Registration Statement (and each amendment or
  supplement thereto) the Company will allow the Agent
  to participate fully in the preparation of, and approve the form of the
  Preliminary Prospectus, the Final Prospectus, any Supplementary Material, and
  the Registration Statement (and each amendment or supplement thereto), and
  will allow the Agent to conduct all due diligence which they may require
  to conduct in order to fulfil their obligations and in order to enable them
  responsibly to execute the certificate required to be executed by them at the
  end of each of the Preliminary Prospectus, the Final Prospectus and any
  Supplementary Material;

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  All
  the information and statements to be contained in the Preliminary Prospectus,
  the Final Prospectus, any Supplementary Material and the Registration
  Statement (and
  each amendment or supplement thereto), will, at the
  respective dates of delivery thereof, constitute full, true and plain
  disclosure of all material facts relating to the Company and the Registrable Securities and will not contain an untrue statement of a material fact or
  omit to state a material fact required to be stated therein or necessary to
  make the statements therein not misleading (provided that this representation
  is not intended to extend to information and statements included in reliance
  upon and in conformity with information furnished to the Corporation by or on
  behalf of the Agent specifically for use therein);

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  None
  of the Preliminary Prospectus, the Final Prospectus, any Supplementary
  Material nor the Registration Statement (and each amendment or supplement thereto),
  will contain a misrepresentation (provided that this representation
  is not intended to extend to information and statements included in reliance
  upon and in conformity with information furnished to the Company by or on
  behalf of the Agent specifically for use therein);

  
	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  The
  Preliminary Prospectus, the Final Prospectus, and any Supplementary Material
  will contain the disclosure required by all requirements of the Securities
  Laws of the Qualifying Jurisdictions;

  
	
   

  	
   

  	
   

  

 

 

25

 

	
  (h)

  	
   

  	
  The
  Registration Statement (and each amendment or supplement thereto), will
  contain the disclosure required by all requirements of the Securities Laws of
  the United States;

  
	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  The
  Company recognizes that it is fundamental to the Purchasers that the
  distribution of the Unit Shares and Warrants be qualified under the Final
  Prospectus and their resale be registered in the United States under the
  Registration Statement so that the Unit Shares, Warrants and Warrant Shares
  will be tradable in such Qualifying Provinces and in the United States
  without the necessity of the holder thereof filing a prospectus or effecting
  the trade in a manner which falls within one of the various private placement
  exemptions or exemptions from registration under applicable securities
  legislation or subject to any statutory or regulatory hold periods or trade
  restrictions in such Qualifying Provinces and in the United States (provided
  such trade is not a “control distribution” as defined by the applicable
  Securities Laws, or an “affiliate” as defined in Rule 144). The Company
  acknowledges that it is for this reason that the Company has agreed to use
  its commercially reasonable efforts to ensure that the Preliminary Prospectus
  and the Final Prospectus are to be filed with the Securities Regulators in
  the Qualifying Provinces and receipts are to be obtained therefore and the
  Registration Statement is to be filed with the SEC in the United States
  within the time periods contemplated by this Agreement.

  

 

7.                                      Delivery of Prospectuses

 

(a)                                  The
Company shall deliver or cause to be delivered to the Agent and the Agent’s
counsel the documents set out below at the respective times indicated:

 

	
  (i)

  	
   

  	
  prior to or contemporaneously, as nearly
  as practicable, with the filing with the Securities Regulators (i) in
  the Qualifying Provinces of the Preliminary Prospectus or of the Final
  Prospectus copies of the Preliminary Prospectus or of the Final Prospectus
  signed as required by applicable Securities Laws, and (ii) with the SEC
  of the Registration statement and all amendments thereto;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  as soon as they are available, copies of
  any Supplementary Material required to be filed under any of the Securities
  Laws in Canada and the United States, signed as required by applicable
  Securities Laws and including copies of any documents or information
  incorporated by reference therein which have not been previously delivered to
  the Agent;

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  prior to filing the Final Prospectus upon
  the effectiveness of the Registration Statement, comfort letters from the
  auditors of the Company dated the date of the Final Prospectus and the
  Registration Statement and satisfactory in form and substance to the
  Agent, with respect to the financial and accounting information contained in
  or incorporated by reference into the Final Prospectus and the Registration
  Statement which

  

 

26

 

	
   

  	
   

  	
  comfort
  letter shall be based on a review by the auditors having a cut-off date of
  not more than two business days prior to the date of the comfort letter and
  shall be in addition to any comfort letter which must be filed with
  securities regulatory authorities pursuant to Securities Laws in Canada or
  the United States, as the case may be; and

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  as
  soon as possible and, in any event, a date two Business Days following
  receipt of a decision document in respect of the Preliminary Prospectus and
  the Final Prospectus, without charge, shall print and deliver such number of
  commercial copies of the Preliminary Prospectus and the Final Prospectus as
  the Agent shall reasonably require.

  

 

(b)                               The
delivery to the Agent of the Prospectus, or any Supplementary Material and the
filing of the Registration Statement (or any amendment or supplement thereto)
with the SEC shall constitute the representation and warranty of the Company to
the Agent that, at the time of such delivery or filing, as the case may be:

 

	
  (i)

  	
   

  	
  such
  documents contain full, true and plain disclosure of all material facts
  relating to the Company and the Common Shares, and no material facts have
  been omitted therefrom which are necessary to make the statements therein not
  misleading in light of the circumstances in which they are made;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  such
  documents contain no misrepresentations; and

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  such
  documents comply in all material respects with the Securities Laws in Canada
  and the United States;

  

 

provided,
however, that the foregoing representations and warranties will not apply with
respect to information and statements contained in the Prospectus or the
Registration Statement or misrepresentations with respect thereto or omissions
therefrom which relate solely to the Agent or information provided by the
Agent.

 

8.                                  Closing
Deliveries. The purchase and sale of the Subscription Receipts shall be completed
at the Closing Time at the offices
of the Company’s counsel, Fraser Milner Casgrain LLP, Toronto, Ontario at 9:00 a.m. (Toronto time), or at such other place
as the Agent and the Company may agree upon in writing. At or prior to the
Closing Time, the Company shall duly and validly deliver to the Agent
certificates in definitive form representing the Subscription Receipts in
the names of such Purchasers or as indicated on their respective Subscription
Agreements, against payment to the Company of the Issue Price therefor, in
lawful money of the United States. The Agent may discharge its payment
obligations under this paragraph 8 by wire transfer from the Agent to the
Company equal to 50% of the aggregate Issue Price for the Subscription Receipts
less the Agent’s expenses, as set out in paragraph 11 hereto and less 50% of the Commission. At the direction of the
Company, the Agent shall, by way of wire transfer, deposit the remaining 50% of
the aggregate Issue Price in a trust account of the Transfer Agent as
contemplated in the Subscription Receipt Agreement.

 

27

 

9.                                    Closing
Conditions. Each Purchaser’s obligation to purchase the Subscription Receipts at
the Closing Time shall be conditional upon the fulfilment at or before the
Closing Time of the following conditions:

 

(a)                                   the Agent shall have
received a certificate, dated as of the Closing Date, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, or such other
officers of the Company as the Agent may agree, certifying for and on
behalf of the Company, to the best of their knowledge, information and belief,
that:

 

(i)                                      no order, ruling or
determination having the effect of suspending the sale or ceasing the trading
in any securities of the Company (including the Common Shares) has been issued
by any regulatory authority and is continuing in effect and no proceedings for
that purpose have been instituted or are pending or, to the knowledge of such
officers, contemplated or threatened by any regulatory authority;

 

(ii)                                   the Company has duly
complied with all the terms, covenants and conditions of this Agreement on its part to
be complied with up to the Closing Time; and

 

(iii)                                there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and the
Material Subsidiaries considered as a whole, whether or not arising in the
ordinary course of business and the representations, warranties and covenants
of the Company contained in this Agreement are true and correct as of the
Closing Time with the same force and effect as if made at and as of the Closing
Time after giving effect to the transactions contemplated by this Agreement;

 

(b)                                   the Agent shall have
received at the Closing Time certificates dated the Closing Date, signed by
appropriate officers of the Company addressed to the Agent and their counsel,
with respect to the articles and by-laws of the Company, all resolutions of the
Company’s board of directors relating to this Agreement and the transactions
contemplated hereby and thereby, the incumbency and specimen signatures of
signing officers, the articles and by-laws of the Company and such other
matters as the Agent may reasonably request;

 

(c)                                   the Agent shall have
received at the Closing Time, evidence of all requisite approvals, consents and
acceptances of the appropriate regulatory authorities required to be made or
obtained by the Company in order to complete the Offering;

 

(d)                                   the Subscription Receipt
Agreement, the Registration Rights Agreement, Warrant Indenture, the
Subscription Agreements, the Subscription Receipt Certificates and the
certificate representing the Compensation Option shall have been executed and
delivered by the parties thereto in form and substance satisfactory to the
Agent and their counsel, acting reasonably;

 

28

 

(e)                                  the Agent shall have
received favourable legal opinions addressed to the Agent, and the Purchasers,
in form and substance satisfactory to the Agent’s counsel acting
reasonably, dated each applicable Closing Date, from Fraser Milner Casgrain LLP
and Dufford & Brown, P.C., counsel for the Company and where
appropriate, counsel in the other Selling Jurisdictions, which counsel in turn may rely,
as to matters of fact, on certificates of auditors, public officials and
officers of the Company in the Form of Exhibit B hereto;

 

(f)                                    the Agent shall have
received good standing certificates or similar certificates with respect to the
jurisdictions in which the Company and the Material Subsidiaries are
incorporated;

 

(g)                                 the Agent shall, in its
sole discretion, be satisfied with their due diligence review with respect to
the business, assets, financial condition, affairs and prospects of the
Company;

 

(h)                                  the Agent shall have received favourable legal opinions addressed to the
Agent, the Purchasers and the Agent’s counsel in form and substance
satisfactory to the Agent’s counsel, acting reasonably, dated the Closing Date
from local counsel to the Company in the United States as to the title and
ownership interest in the Tonkin Springs gold property;

 

(i)                                     the Company will cause
its Transfer Agent to deliver a certificate as to the issued and outstanding
Common Shares; and

 

(j)                                   the Agent shall have received a favourable legal
opinion addressed to the Agent, the Purchasers and the Agent’ counsel, as to (i) the
incorporation and subsistence of the Material Subsidiaries; (ii) the
corporate power and authority of the Material Subsidiaries to carry on its
business as presently carried on and to own its assets and property; and (iii) as
to the registered ownership of the issued and outstanding shares of the
Material Subsidiaries.

 

10.                                Rights of
Termination

 

(a)                                  Due
Diligence Out. In the event that the due diligence investigations performed by the
Agent and/or their representatives reveals any material information or fact not
generally known to the public which might, in the Agent’s sole opinion, acting
reasonably, adversely affect the market price of the securities of the Company,
quality of the investment or marketability of the Offering, the Agent shall be
entitled, at its sole option and in accordance with subparagraph 10(h) of
this Agreement, to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by it to purchase Subscription Receipts)
by notice to that effect given to the Company any time prior to the Closing
Time.

 

(b)                                  Litigation.
If any inquiry, action, suit, investigation or proceeding, whether
formal or informal, (including matters of regulatory transgression or unlawful
conduct and including any inquiry or investigation by any Securities Regulator)
is commenced, announced or threatened in relation to the Company or any of the
officers or directors of the Company or any of its principal security holders,
the Agent shall be entitled, at its sole option and in accordance with

 

29

 

subparagraph 10(h) of this Agreement, to
terminate its obligations under this Agreement (and the obligations of the
Purchasers arranged by them to purchase Subscription Receipts) by notice to
that effect given to the Company any time prior to the Closing Time.

 

(c)                                  Disaster
Out. In the event that prior to the Closing Time, there should develop, occur
or come into effect any action, state, or condition, including, without
limitation, terrorism, accident, a new or change in any governmental law or
regulation, or other condition or major financial occurrence of national or
international consequence, which, in the sole opinion of the Agent materially
adversely affects, or may adversely affect, the financial markets
generally or the business, operations, affairs or profitability of the Company,
or the trading, market price or value of the securities of the Company, the Agent
shall be entitled at their sole option, in accordance with subparagraph 10(h) of
this Agreement, to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by them to purchase Subscription
Receipts) by written notice to that effect given to the Company prior to the
Closing Time.

 

(d)                                  Change in
Material Fact. In the event that prior to the Closing Time, the Agent or the Agent’
representatives, through their due diligence investigations, or otherwise
discover or there should occur a material change or a change in any material
fact or new material fact shall arise, which, in the sole opinion of the Agent
has or could be expected to have a significant adverse effect on the market
price or value of the securities of the Company, the Agent shall be entitled,
at its sole option, in accordance with subparagraph 10(h), to terminate its
obligations under this Agreement (and the obligations of the Purchasers
arranged by it to purchase Subscription Receipts) by written notice to that
effect given to the Company prior to the Closing Time.

 

(e)                                  Non-Compliance
With Conditions. The Company agrees that all terms, conditions and
covenants in this Agreement shall be construed as conditions and complied with
so far as the same relate to acts to be performed or caused to be performed by
the Company and that it will use its best efforts to cause such conditions to
be complied with, and any breach or failure by the Company to comply with any
of such conditions or in the event that any representation or warranty given by
the Company becomes false and is not rectified as at the Closing Time, shall
entitle the Agent, at its sole option in accordance with subparagraph 10(h), to
terminate its obligations under this Agreement (and the obligations of the
Purchasers arranged by it to purchase the Subscription Receipts) by notice to
that effect given to the Company at or prior to the Closing Time. The Agent may waive,
in whole or in part, or extend the time for compliance with, any terms and
conditions without prejudice to its rights in respect of any other of such
terms and conditions or any other or subsequent breach or non-compliance,
provided that any such waiver or extension shall be binding upon the Agent only
if the same is in writing and signed by it.

 

(f)                                    Cease
Trade Order. In the event that a stop order exists with respect to the securities of
the Company, the Agent shall be entitled, at its sole option, in accordance
with subparagraph 10(h) of this Agreement, to terminate its obligations
under this Agreement (and the obligations of the Purchasers arranged by it to
purchase Subscription Receipts) by written notice to that effect given to the
Company prior to the Closing Time.

 

30

 

(g)                                 Profitably Marketed. In the event that prior to the Closing Time, the state
of the Canadian, U.S. or international financial markets is such that, in the
sole opinion of the Agent, the Subscription Receipts cannot be profitably
marketed, the Agent shall be entitled at its sole option, in accordance with
subparagraph 10(h) of this Agreement, to terminate its obligations under
this Agreement (and the obligations of the Purchasers arranged by them to
purchase Special Warrants) by written notice to that effect given to the
Company prior to the Closing Time.

 

(h)                                 Exercise
of Termination Rights. The rights of termination contained in subparagraphs
10(a), (b), (c), (d), (e) (f) and (g) may be exercised by
the Agent and are in addition to any other rights or remedies the Agent may have
in respect of any default, act or failure to act or non-compliance by the
Company in respect of any of the matters contemplated by this Agreement or
otherwise. In the event of any such termination by the Agent, there shall be no
further liability on the part of the Agent to the Company or on the part of
the Company to the Agent except in respect of any liability which may have
arisen or may arise after such termination in respect of acts or omissions
prior to such termination under sections 11 and 13.

 

11.                               Expenses.
Whether or not the sale of the Subscription Receipts shall be completed,
the Company will pay all reasonable
expenses and fees in connection with the Offering, including, all reasonable
expenses of or incidental to the issue, sale or distribution of the
Subscription Receipts; the reasonable fees and expenses of the Company’s
counsel, accountants and technical experts; all reasonable costs incurred in
connection with the preparation of documents relating to the Offering and the
Prospectus and Registration Statement (including printing and delivery costs
associated therewith); all costs associated with listing the securities of the
Company on the Toronto Stock Exchange; and all reasonable expenses and fees
incurred by the Agent, which shall include the reasonable fees and
disbursements of the Agent’s counsel. All reasonable fees and expenses incurred
by the Agent or on their behalf including the fees of the Agent’s counsel shall
be payable by the Company immediately upon receiving an invoice therefor.

 

12.                             Survival
of Representations and Warranties. All terms, warranties, representations, covenants and
agreements herein contained or contained in any documents submitted pursuant to
this Agreement and in connection with the transactions herein contemplated
shall survive the purchase and sale of the Subscription Receipts and continue
in full force and effect for the benefit of the Agent and Purchasers and shall
not be limited or prejudiced by any investigation made by or on behalf of the
Agent in connection with the purchase and sale of the Subscription Receipts.

 

13.                             (a)                              Indemnity. The Company hereby agrees to
indemnify and hold the Agent and/or any of its affiliates and the directors,
officers, employees, shareholders and unitholders of the Agent (hereinafter
referred to as the “Personnel”)
harmless from and against any and all expenses, losses, claims, actions,
damages or liabilities, whether joint or several (including the aggregate
amount paid in reasonable settlement of any actions, suits, proceedings or
claims), and the reasonable fees and expenses of its counsel that may be
incurred in advising with respect to and/or defending any claim that may be
made against the Agent, to which the Agent and/or their Personnel may become
subject or otherwise involved in any capacity under any statute or common law
or otherwise insofar as such expenses, losses, claims, damages, liabilities or
actions

 

31

 

arise out of or are based, directly or indirectly, upon the performance
of professional services rendered to the Company by the Agent and their
Personnel hereunder or otherwise in connection with the matters referred to in
this Agreement, including any loss, claim, damage and expense arising out of
any untrue statement of a material fact contained in the Registration Statement
or the Prospectus or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided, however, that this indemnity shall not apply to the
extent that a court of competent jurisdiction in a final judgment that has
become non-appealable shall determine that:

 

(i)                                     the Agent or their Personnel have
been grossly negligent or dishonest or have committed any fraudulent act in the
course of such performance;

 

(ii)                                  the expenses, losses, claims,
damages or liabilities, as to which indemnification is claimed, were directly
caused by the gross negligence, dishonesty or fraud referred to in (i); and

 

(iii)                               the loss or expense was caused by
failure of the Agent to comply with this Agreement or by a statement provided
to the Company by the Agent in writing.

 

If for any reason
(other than the occurrence of any of the events itemized in (i) and (ii) above),
the foregoing indemnification is unavailable to the Agent or insufficient to
hold it harmless, then the Company shall contribute to the amount paid or
payable by the Agent as a result of such expense, loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and the Agent on the other
hand but also the relative fault of the Company and the Agent, as well as any
relevant equitable considerations; provided that the Company shall, in any
event, contribute to the amount paid or payable by the Agent as a result of
such expense, loss, claim, damage or liability, any excess of such amount over
the amount of the fees received by the Agent hereunder pursuant to this Agreement.

 

The Company agrees that in case any legal proceeding shall be brought
against the Company and/or the Agent by any governmental commission or
regulatory authority or any stock exchange or other entity having regulatory
authority, either domestic or foreign, shall investigate the Company and/or the
Agent and any Personnel of the Agent shall be required to testify in connection
therewith or shall be required to respond to procedures designed to discover
information regarding, in connection with, or by reason of the performance of
professional services rendered to the Company by the Agent, the Agent shall
have the right to employ their own counsel in connection therewith, and the
reasonable fees and expenses of such counsel as well as the reasonable costs (including
an amount to reimburse the Agent for time spent by its Personnel in connection
therewith) and out-of-pocket expenses incurred by its Personnel in connection
therewith shall be paid by the Company as they occur.

 

Promptly after receipt of notice of the commencement of any legal
proceeding against the Agent or any of its Personnel or after receipt of notice
of the commencement of any investigation, which is based, directly or
indirectly, upon any matter in respect of which indemnification may be
sought from the Company, the Agent will notify the Company in writing of the

 

32

 

commencement thereof and, throughout the course thereof, will provide
copies of all relevant documentation to the Company, will keep the Company
advised of the progress thereof and will discuss with the Company all
significant actions proposed. The omission to so notify the Company shall not
relieve the Company of any liability which the Company may have to the
Agent except only to the extent that any such delay in giving or failure to
give notice as herein required materially prejudices the defence of such
action, suit, proceeding, claim or investigation or results in any material
increase in the liability which the Company would otherwise have under this
indemnity had the Agent not so delayed in giving or failed to give the notice
required hereunder.

 

The Company shall be entitled, at its own
expense, to participate in and, to the extent it may wish to do so, assume
the defence thereof, provided such defence is conducted by experienced and
competent counsel. Upon the Company notifying the Agent in writing of its
election to assume the defence and retaining counsel, the Company shall not be
liable to the Agent for any legal expenses subsequently incurred by them in
connection with such defence. If such defence is assumed by the Company, the
Company throughout the course thereof will provide copies of all relevant
documentation to the Agent, will keep the Agent advised of the progress thereof
and will discuss with the Agent all significant actions proposed.

 

Notwithstanding the foregoing paragraph, the
Agent shall have the right, at the Company’s expense, to employ counsel of the
Agent’ choice, in respect of the defence of any action, suit, proceeding, claim
or investigation if: (i) the employment of such counsel has been
authorized by the Company; or (ii) the Company has not assumed the defence
and employed counsel therefor within a reasonable time after receiving notice
of such action, suit, proceeding, claim or investigation; or (iii) counsel
retained by the Company or the Agent have advised the Indemnified Party that
representation of both parties by the same counsel would be inappropriate for
any reason, including without limitation because there may be legal
defences available to the Agent which are different from or in addition to
those available to the Agent (in which event and to that extent, the Company
shall not have the right to assume or direct the defence on the Agent’ behalf)
or that there is a conflict of interest between the Company and the Agent or
the subject matter of the action, suit, proceeding, claim or investigation may not
fall within the indemnity set forth herein.

 

No admission of liability and no settlement of
any action, suit, proceeding, claim or investigation shall be made without the
consent of the Agent affected. No admission of liability shall be made and the
Company shall not be liable for any settlement of any action, suit, proceeding,
claim or investigation made without its consent.

 

The indemnity and contribution obligations of the Company shall be in
addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to the Personnel of the Agent and
shall be binding upon and enure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Agent and any of the
Personnel of the Agent. The foregoing provisions shall survive the completion
of professional services rendered under this Agreement or any termination of
the authorization given.

 

33

 

(b)                                  Right of
Indemnity in Favour of Others. With respect to any party who may be
indemnified by section 13(a) above and is not a party to this
Agreement, the Agent shall obtain and hold the rights and benefits of this section 13
in trust for and on behalf of such indemnified party.

 

14.                               Advertisements.
The Company acknowledges that the Agent shall have the right, subject to
clauses 1(a) and (c) of this Agreement, at its own expense, to place
such advertisement or advertisements relating to the sale of the Subscription
Receipts contemplated herein as the Agent may consider desirable or
appropriate and as may be permitted by applicable law. The Company and the
Agent each agree not to make or publish any advertisement in any media
whatsoever relating to, or otherwise publicise, the transaction provided for
herein so as to result in any exemption from the prospectus and registration
requirements of Securities Laws in any of the Selling Jurisdictions or any
other jurisdiction in which the Subscription Receipts shall be offered or sold
being unavailable in respect of the sale of the Subscription Receipts to
prospective purchasers.

 

15.                               Commission. In consideration of
the services to be rendered by the Agent in connection with the Offering, the
Company shall pay to the Agent a cash commission equal to 7.0% of the aggregate
Issue Price (the “Commission”) and the Agent’s
expenses and as set forth in section 11. The Company will also issue to the Agent a compensation option
(the “Compensation Option”) exercisable,
without payment of additional consideration, to acquire non-transferable broker
warrants (the “Broker Warrants”) equal to 6.0%
of the aggregate number of Subscription Receipts sold pursuant to the Offering.
Each Broker Warrant will be exercisable to purchase one Unit at the Issue Price
until 5:00 p.m. (Toronto time) on the date that is 18 months following the
Closing Date. The Commission
will be paid, and the Compensation Options will be issued, to the Agent as
follows: (i) 50% of such amounts on the Closing Date; and (ii) the
remaining 50% of such amounts upon the release of the Escrowed Funds to the
Company.

 

16. Notices. Unless
otherwise expressly provided in this Agreement, any notice or other
communication to be given under this Agreement (a “notice”) shall be in writing
addressed as follows:

 

(a)                                  in the case of the Company, to:

 

U.S. Gold Corporation

99 George Street

3rd Floor

Toronto, Ontario M5A 2N4

 

Attention:  Robert R. McEwen

Fax:  (647) 258-0408

 

with a copy to:

 

Fraser Milner Casgrain LLP

1 First Canadian Place

 

34

 

39th Floor

100 King Street West

Toronto, Ontario M5X 1B2

 

Attention:  Michael Melanson

 

Fax: (416) 863-4592

 

and to:

 

Dufford & Brown
P.C.

1700 Broadway, Suite 2100

Denver, CO 80290-2101

Attention:  David Babiarz

Fax:  (303) 832-3804

 

(b)                             in
the case of the Agent at:

 

GMP Securities L.P.

145 King Street
West

Suite 1100

Toronto, Ontario
M5H 1J8

 

Attention:  Mark Wellings

Fax:                         (416) 943-6160

 

with a copy
to:

 

Cassels
Brock & Blackwell LLP

2100 Scotia Plaza

40 King Street West

Toronto, Ontario M5H 3C2

 

Attention:  Chad Accursi

Fax:  (416) 642-7131

 

and to:

 

Dorsey &
Whitney LLP

161 Bay Street, Suite 4310

Toronto, Ontario M5J 2S1

 

Attention:  Gil Cornblum

Fax:  (416) 367-7371

 

or to such other address as any of the parties may designate
by notice given to the others.

 

35

 

Each notice shall be personally delivered to the
addressee or sent by facsimile transmission to the addressee and (i) a
notice which is personally delivered shall, if delivered on a Business Day, be
deemed to be given and received on that day and, in any other case, be deemed
to be given and received on the first Business Day following the day on which
it is delivered; and (ii) a notice which is sent by facsimile transmission
shall be deemed to be given and received on the first Business Day following
the day on which it is sent.

 

17.                               Time of
the Essence. Time shall, in all respects, be of the essence hereof.

 

18.                               Headings. The headings contained
herein are for convenience only and shall not affect the meaning or
interpretation hereof.

 

19.                               Singular
and Plural, etc. Where the context so requires, words importing the
singular number include the plural and vice versa, and words importing gender
shall include the masculine, feminine and neuter genders.

 

20.                               Entire
Agreement; No Advisory or Fiduciary Relationship.

 

(a)                                   This Agreement
constitutes the only agreement between the parties with respect to the subject
matter hereof and shall supersede any and all prior negotiations and
understandings. This Agreement may be amended or modified in any respect
by written instrument only. All schedules attached to this Agreement are deemed
to be part hereof and are hereby incorporated by reference.

 

(b)                                 The Company acknowledges
and agrees that (a) the offer of Subscription Receipts pursuant to this
Agreement, including the determination of the offering price of the
Subscription Receipts and any related commissions, is an “arm’s length”
commercial transaction between the Company and the Agent, (ii) in
connection with the Offering contemplated hereby and the process leading to
such transaction the Agent is and has been acting solely as a principal and is
not the agent or fiduciary of the Company, or its shareholders, creditors,
employees or any other party, (c) the Agent has not assumed or will assume
an advisory or fiduciary responsibility in favour of the Company with respect
to the Offering contemplated hereby and the process leading thereto
(irrespective of whether the Agent has advised or is currently advising the
Company on other matters) and the Agent has no obligation to the Company with
respect to the Offering contemplated hereby except the obligations expressly
set forth herein, (iv) the Agent and its affiliates may be engaged in
a broad range of transactions that involve interests that differ from those of
the Company, and (v) the Agent has not provided any legal, accounting,
regulatory or tax advice with respect to the Offering contemplated hereby and
the Company has consulted its own legal, accounting, regulatory and tax
advisors to the extent it deemed appropriate.

 

21.                               Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
or limit the validity or enforceability of the remaining provisions of this
Agreement.

 

22.                               Governing
Law; Attornment to Ontario. This Agreement shall be governed by and construed in
accordance with the laws of Ontario and the laws of Canada applicable therein.

 

36

 

Any and all disputes
arising under this Agency Agreement, whether as to interpretation, performance
or otherwise, shall be subject to the exclusive jurisdiction of the courts of
the Province of Ontario and each of the parties hereto hereby irrevocably
attorns to the jurisdiction of the courts of such province.

 

23.                               Successors
and Assigns. The terms and provisions of this Agreement shall be binding upon and
enure to the benefit of the Company, the Agent and the Purchasers and their
respective executors, heirs, successors and permitted assigns; provided that,
except as provided herein, or in the Subscription Receipt Agreement or in the
Subscription Agreements, this Agreement shall not be assignable by any party
without the written consent of the others.

 

24.                               Further
Assurances. Each of the parties hereto shall do or cause to be done all such acts
and things and shall execute or cause to be executed all such documents,
agreements and other instruments as may reasonably be necessary or
desirable for the purpose of carrying out the provisions and intent of this
Agreement.

 

25.                               Effective
Date. This Agreement is intended to and shall take effect as of the date
first set forth above, notwithstanding its actual date of execution or
delivery.

 

26.                               Language.
The parties hereby acknowledge that they have expressly required this
Agreement and all notices, statements of account and other documents required
or permitted to be given or entered into pursuant hereto to be drawn up in the
English language only. Les parties reconnaissent avoir expressément demandé que
la présente Convention ainsi que tout avis, tout état de compte et tout autre
document à être ou pouvant être donné ou conclu en vertu des dispositions des
présentes, soient rédigés en langue anglaise seulement.

 

27.                               Counterparts
and Facsimile. This Agreement may be executed in any number of counterparts and
by facsimile, each of which so executed shall constitute an original and all of
which taken together shall form one and the same agreement.

 

[intentionally blank]

 

37

 

If the Company is in agreement with the foregoing
terms and conditions, please so indicate by executing a copy of this letter
where indicated below and delivering the same to the Agent.

 

Yours
very truly,

 

GMP SECURITIES L.P.

 

	
  Per:

  	
   

  	
   

  
	
  Authorized Signing Officer

  

 

GRIFFITHS McBURNEY CORP.

 

 

	
  Per:

  	
   

  	
   

  
	
  Authorized Signing Officer

  

 

 

The foregoing is hereby accepted on the terms and
conditions therein set forth.

 

DATED as of February 22,
2006.

 

U.S. GOLD CORPORATION

 

	
  Per:

  	
   

  	
   

  
	
  Authorized Signing Officer

  

 

38

 

SCHEDULE “A”

Details of outstanding Convertible Securities

 

1

 

SCHEDULE “B”

Exceptions

 

(ii)                                                          The Company also owns an interest in:

 

(1)                                  Tonkin
Springs Venture Limited Partnership, organized under the laws of Nevada; and

 

(2)                                  Tonkin
Springs LLC, a limited liability company organized under the laws of the State
of Delaware.

 

(vii)                                                   The Company anticipates an increase in the liability for reclamation
obligation in accordance with SFAS 143 for internal estimates of costs and
timing related to reclamation.

 

(xii)                                                     The Company has granted Robert McEwen registration rights.

 

(xiv)                                                 The Company entered into an agreement to pay certain distributions
with French American Banking Corporation.

 

(xv)                                                    (i)                                     The Company received a Notice of Non-compliance from United States
Bureau of Land Management dated December 27, 2005 regarding alleged
deficiencies in closure plans, among other things.

 

(ii)                                  The
Company received a Notice of Non-compliance from the Nevada Division of Environmental
Protection dated April 18, 2005 regarding alleged deficiencies in closure
plans, among other things.

 

(xxxiii)                                        The Company has received a Notice of Non-compliance from United
States Bureau of Land Management dated December 27, 2005 regarding alleged
deficiencies in closure plans, among other things.

 

2

 

EXHIBIT “A”

Registration Rights
Agreement

 

3

 

EXHIBIT “B”

Form of legal opinions

 

4Exhibit 10.2

 

U.S. GOLD CORPORATION

 

- and -

 

GMP SECURITIES L.P.

 

- and -

 

EQUITY TRANSFER SERVICES INC.

 

 

SUBSCRIPTION RECEIPT INDENTURE

 

Providing for the Issue of

Subscription Receipts

 

 

Dated
as of February 22, 2006

 

Fraser
Milner Casgrain LLP

 

 

TABLE
OF CONTENTS

 

ARTICLE ONE

INTERPRETATION

 

	
  Section 1.01

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
  Section 1.02

  	
   

  	
  Words Importing the Singular

  	
   

  	
  8

  
	
  Section 1.03

  	
   

  	
  Interpretation Not Affected by Headings,
  Etc.

  	
   

  	
  8

  
	
  Section 1.04

  	
   

  	
  Day Not a Business Day

  	
   

  	
  8

  
	
  Section 1.05

  	
   

  	
  Time of the Essence

  	
   

  	
  8

  
	
  Section 1.06

  	
   

  	
  Currency

  	
   

  	
  8

  
	
  Section 1.07

  	
   

  	
  Applicable Law

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE TWO

  	
   

  	
   

  
	
   

  	
   

  	
  THE
  SUBSCRIPTION RECEIPTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Creation and Issue of Subscription Receipts

  	
   

  	
  8

  
	
  Section 2.02

  	
   

  	
  Terms of Subscription Receipts

  	
   

  	
  9

  
	
  Section 2.03

  	
   

  	
  Form of Subscription Receipt
  Certificates

  	
   

  	
  10

  
	
  Section 2.04

  	
   

  	
  Signing of Subscription Receipt
  Certificates

  	
   

  	
  11

  
	
  Section 2.05

  	
   

  	
  Certification by Subscription Receipt Agent

  	
   

  	
  11

  
	
  Section 2.06

  	
   

  	
  Subscription Receipts to Rank Pari Passu

  	
   

  	
  12

  
	
  Section 2.07

  	
   

  	
  Issue in Substitution for Lost
  Certificates, Etc.

  	
   

  	
  12

  
	
  Section 2.08

  	
   

  	
  Cancellation of Surrendered Subscription
  Receipts

  	
   

  	
  12

  
	
  Section 2.09

  	
   

  	
  Subscription Receiptholder not a
  Shareholder

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE THREE

  	
   

  	
   

  
	
   

  	
   

  	
  REGISTRATION,
  TRANSFER AND OWNERSHIP OF SUBSCRIPTION RECEIPTS

  	
   

  	
   

  
	
   

  	
   

  	
  AND
  EXCHANGE OF SUBSCRIPTION RECEIPT CERTIFICATES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Registration and Transfer of Subscription
  Receipts

  	
   

  	
  13

  
	
  Section 3.02

  	
   

  	
  Exchange of Subscription Receipt
  Certificates

  	
   

  	
  14

  
	
  Section 3.03

  	
   

  	
  No Charges for Transfer or Exchange

  	
   

  	
  15

  
	
  Section 3.04

  	
   

  	
  Ownership of Subscription Receipts

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE FOUR

  	
   

  	
   

  
	
   

  	
   

  	
  CONVERSION
  OF SUBSCRIPTION RECEIPTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Conversion of Subscription Receipts

  	
   

  	
  16

  
	
  Section 4.02

  	
   

  	
  Effect of Conversion

  	
   

  	
  16

  
	
  Section 4.03

  	
   

  	
  No Fractional Common Shares or Warrants

  	
   

  	
  17

  
	
  Section 4.04

  	
   

  	
  Recording:

  	
   

  	
  17

  
	
  Section 4.05

  	
   

  	
  Securities Restrictions

  	
   

  	
  17

  
	
  Section 4.06

  	
   

  	
  Adjustments

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE FIVE

  	
   

  	
   

  
	
   

  	
   

  	
  COVENANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  General Covenants

  	
   

  	
  25

  
	
  Section 5.02

  	
   

  	
  Remuneration and Expenses of Subscription
  Receipt Agent

  	
   

  	
  28

  
	
  Section 5.03

  	
   

  	
  Securities Qualification Requirements

  	
   

  	
  28

  

 

 

	
  Section 5.04

  	
   

  	
  Notice of Issue

  	
   

  	
  28

  
	
  Section 5.05

  	
   

  	
  Performance of Covenants by Subscription
  Receipt Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE SIX

  	
   

  	
   

  
	
   

  	
   

  	
  DEPOSIT
  OF PROCEEDS AND CANCELLATION OF SUBSCRIPTION RECEIPTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

  	
  Deposit of Escrowed Proceeds

  	
   

  	
  29

  
	
  Section 6.02

  	
   

  	
  Investment of Escrowed Funds

  	
   

  	
  29

  
	
  Section 6.03

  	
   

  	
  Release of Escrowed Proceeds

  	
   

  	
  29

  
	
  Section 6.04

  	
   

  	
  Escrowed Proceeds Held by the Subscription
  Receipt Agent

  	
   

  	
  30

  
	
  Section 6.05

  	
   

  	
  Role as Subscription Receipt Agent

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE SEVEN

  	
   

  	
   

  
	
   

  	
   

  	
  ENFORCEMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Suits by Subscription Receiptholders

  	
   

  	
  30

  
	
  Section 7.02

  	
   

  	
  Limitation of Liability

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE EIGHT

  	
   

  	
   

  
	
   

  	
   

  	
  MEETINGS
  OF SUBSCRIPTION RECEIPTHOLDERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Right to Convene Meetings

  	
   

  	
  31

  
	
  Section 8.02

  	
   

  	
  Notice

  	
   

  	
  31

  
	
  Section 8.03

  	
   

  	
  Chairman

  	
   

  	
  31

  
	
  Section 8.04

  	
   

  	
  Quorum

  	
   

  	
  32

  
	
  Section 8.05

  	
   

  	
  Power to Adjourn

  	
   

  	
  32

  
	
  Section 8.06

  	
   

  	
  Show of Hands

  	
   

  	
  32

  
	
  Section 8.07

  	
   

  	
  Poll

  	
   

  	
  32

  
	
  Section 8.08

  	
   

  	
  Voting

  	
   

  	
  32

  
	
  Section 8.09

  	
   

  	
  Regulations

  	
   

  	
  33

  
	
  Section 8.10

  	
   

  	
  The Corporation and Subscription Receipt
  Agent may be Represented

  	
   

  	
  33

  
	
  Section 8.11

  	
   

  	
  Powers Exercisable by Extraordinary
  Resolution

  	
   

  	
  33

  
	
  Section 8.12

  	
   

  	
  Meaning of “Extraordinary Resolution”

  	
   

  	
  35

  
	
  Section 8.13

  	
   

  	
  Powers Cumulative

  	
   

  	
  35

  
	
  Section 8.14

  	
   

  	
  Minutes

  	
   

  	
  36

  
	
  Section 8.15

  	
   

  	
  Instruments in Writing

  	
   

  	
  36

  
	
  Section 8.16

  	
   

  	
  Binding Effect of Resolutions

  	
   

  	
  36

  
	
  Section 8.17

  	
   

  	
  Holdings by the Corporation and
  Subsidiaries Disregarded

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE NINE

  	
   

  	
   

  
	
   

  	
   

  	
  SUPPLEMENTAL
  INDENTURES AND SUCCESSOR CORPORATIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  Provision for Supplemental Indentures for
  Certain Purposes

  	
   

  	
  36

  
	
  Section 9.02

  	
   

  	
  Successor Corporations

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE TEN

  	
   

  	
   

  
	
   

  	
   

  	
  CONCERNING
  SUBSCRIPTION RECEIPT AGENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01

  	
   

  	
  Trust Indenture Legislation

  	
   

  	
  38

  
	
  Section 10.02

  	
   

  	
  Rights and Duties of Subscription Receipt
  Agent

  	
   

  	
  38

  
	
  Section 10.03

  	
   

  	
  Evidence, Experts and Advisers

  	
   

  	
  39

  
	
  Section 10.04

  	
   

  	
  Documents, Money, Etc. held by Subscription
  Receipt Agent

  	
   

  	
  40

  

 

 

	
  Section 10.05

  	
   

  	
  Action by Subscription Receipt Agent to
  Protect Interests

  	
   

  	
  40

  
	
  Section 10.06

  	
   

  	
  Subscription Receipt Agent not Required to
  Give Security

  	
   

  	
  41

  
	
  Section 10.07

  	
   

  	
  Protection of Subscription Receipt Agent

  	
   

  	
  41

  
	
  Section 10.08

  	
   

  	
  Replacement of Subscription Receipt Agent

  	
   

  	
  42

  
	
  Section 10.09

  	
   

  	
  Conflict of Interest

  	
   

  	
  43

  
	
  Section 10.10

  	
   

  	
  Acceptance of Duties and Obligations

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE ELEVEN

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01

  	
   

  	
  Notice to the Corporation and Subscription
  Receipt Agent

  	
   

  	
  44

  
	
  Section 11.02

  	
   

  	
  Notice to Subscription Receiptholders

  	
   

  	
  47

  
	
  Section 11.03

  	
   

  	
  Satisfaction and Discharge of Indenture

  	
   

  	
  47

  
	
  Section 11.04

  	
   

  	
  Sole Benefit of Parties and Subscription
  Receiptholders

  	
   

  	
  47

  
	
  Section 11.05

  	
   

  	
  Discretion of Directors

  	
   

  	
  48

  
	
  Section 11.06

  	
   

  	
  Counterparts and Formal Date

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule A – Form of Subscription
  Receipt Certificate

  	
   

  	
   

  
	
  Schedule B – Release Notice

  	
   

  	
   

  
						

 

 

SUBSCRIPTION
RECEIPT INDENTURE

 

THIS INDENTURE dated as of the 22nd day of February,
2006.

 

BETWEEN:

 

U.S. GOLD CORPORATION., a corporation duly organized and existing under the laws of the
State of Colorado

 

(hereinafter called the “Corporation”)

 

OF THE FIRST PART

 

- and -

 

GMP SECURITIES L.P.,
a partnership

existing under the laws of the Province of Ontario

 

(hereinafter called the “Agent”)

 

OF THE SECOND PART

 

- and –

 

EQUITY TRANSFER SERVICES INC., a corporation existing

under the Canada Business Corporations Act

 

(hereinafter called the “Subscription Receipt Agent”)

 

OF THE THIRD PART

 

WHEREAS the Corporation proposes to create and issue
Subscription Receipts (as hereinafter defined) to be constituted and issued as
herein provided;

 

AND WHEREAS the Corporation is authorized to create
and issue the Subscription Receipts as herein provided and to complete the
transactions contemplated herein;

 

AND WHEREAS all things necessary have been done and
performed to make the Subscription Receipt Certificates (as hereinafter
defined), when certified by the Subscription Receipt Agent and issued and
delivered as herein provided, legal, valid and binding obligations of the
Corporation with the benefits of and subject to the terms of this Indenture;

 

AND WHEREAS the foregoing recitals are made as
representations by the Corporation and not by the Subscription Receipt Agent;

 

AND WHEREAS the Subscription Receipt Agent has agreed
to enter into this Indenture and to hold all rights, interests and benefits
contained herein for and on behalf of those persons who from time to time
become holders of Subscription Receipts issued pursuant to this Indenture;

 

 

NOW THEREFORE THIS INDENTURE WITNESSES that for good
and valuable consideration mutually given, the receipt and sufficiency of which
are hereby acknowledged, by each of the Corporation, the Agent and the
Subscription Receipt Agent, the Corporation hereby appoints the Subscription
Receipt Agent as agent for the Subscription Receiptholders (as hereinafter
defined), to hold all rights, interests and benefits contained herein for and
on behalf of those persons who from time to time become holders of Subscription
Receipts issued pursuant to this Indenture, and the Corporation, the Agent and
the Subscription Receipt Agent hereby covenant, agree and declare as follows:

 

ARTICLE ONE

INTERPRETATION

 

Section 1.01                            Definitions

 

In this Indenture and in the Subscription
Receipt Certificates, unless there is something in the subject matter or
context inconsistent therewith:

 

(a)                                  “Accredited Investor” means an “accredited investor” as defined in Rule 501(a) of
Regulation D;

 

(b)                                 “Adjustment Period” means the period commencing on the date hereof
and ending at the Time of Expiry;

 

(c)                                  “Agent” means GMP Securities L.P. and Griffiths McBurney Corp.
collectively;

 

(d)                                 “Agent’s Compensation Option” means the agent’s Compensation Option
issued to the Agent on the date hereof entitling the Agent, without payment of
any consideration, to be issued the Agent’s Warrant at the Time of Expiry;

 

(e)                                  “Agent’s Warrants” means the agents warrants issuable to the Agent
upon the conversion of the Agent’s Compensation Option which will entitle the
Agent to acquire up to 1,002,000 units of the Corporation, at a price of $4.50
per unit, with each unit consisting of one Common Share and one Warrant;

 

(f)                                    “Applicable Legislation” means such provisions of any statute of
Canada or of a province thereof, and of regulations under any such statute,
relating to trust indentures or to the rights, duties and obligations of
corporations and of trustees under trust indentures, as are from time to time
in force and applicable to this Indenture;

 

(g)                                 “Business Day” means any day that is not a Saturday, Sunday or
statutory holiday in Toronto, Ontario or Denver, Colorado, or a day when the
principal office of the Subscription Receipt Agent in such city is not
generally open to the public for the transaction of business;

 

(h)                                 “Common Shares” means the shares of common stock, no par value, of
the Corporation as constituted on the date hereof, provided that, in the event
of any adjustment pursuant to section 4.06 hereof, Common Shares shall
thereafter mean  or include, as the case may be,
the shares, other securities or property resulting from such adjustment;

 

2

 

(i)                                     “Conversion Date” means the day on which the Subscription Receipt
Agent is required to convert each Subscription Receipt pursuant to subsection 4.01(a) hereof;

 

(j)                                     “Corporation” means U.S. Gold Corporation, the party of the first part hereunder,
and includes any successor corporation to or of the Corporation which shall
have complied with the provisions of section 9.02 hereof;

 

(k)                                  “Corporation’s auditors” means Stark, Winter, Schenkein &
Co. LLP or such other firm of chartered accountants appointed as the auditor of
the Corporation;

 

(l)                                     “counsel” means a barrister or solicitor or an attorney-at-law or a
firm of barristers and solicitors or attorneys-at-law, who may be counsel
for the Corporation, acceptable to the Subscription Receipt Agent, acting
reasonably;

 

(m)                               “Current Market Price” of a Common Share at any date means the price
per share equal to the volume weighted average price at which the Common Shares
have traded on the Stock Exchange for any 20 consecutive Trading Days selected
by the Corporation ending not more than five Trading Days before such date, or,
if the Common Shares are not listed on the Stock Exchange, on any other stock
exchange on which the Common Shares are then listed as may be selected by
the directors, or, if the Common Shares are not listed on any stock exchange,
then on the over-the-counter market, with the weighted average price per Common
Share being determined by dividing the aggregate sale price of all Common
Shares sold on such stock exchange or market, as the case may be, during
the such 20 consecutive Trading Day period by the aggregate number of Common
Shares so sold or, if not traded on any recognized market or exchange, as
determined by the directors, acting reasonably;

 

(n)                                 “director” means a director of the Corporation for the time being,
and reference without more to an action by the directors means an action by the
directors of the Corporation as a board or, to the extent empowered, by a
committee of the board, in each case by resolution duly passed;

 

(o)                                 “Dividends Paid in the Ordinary Course” means dividends paid or
declared payable in any financial year of the Corporation, to the extent that
cash dividends do not exceed 5% of the Exercise Price and for such purpose the
amount of any dividend paid in shares shall be the aggregate stated capital of
such shares, and the amount of any dividend paid in other than cash or shares
shall be the fair market value of such dividend as determined by resolution
passed by the board of directors of the Corporation subject, if applicable, to
the prior consent of any stock exchange or any over-the counter market in which
the Common Shares are traded;

 

(p)                                 “Effective Date” means the date of this Indenture or, for any
Subscription Receipt issued after the date hereof, the date of issue of such
Subscription Receipt;

 

(q)                                 “Escrowed Funds” means the Escrowed Proceeds plus any interest
earned thereon;

 

3

 

(r)                                    “Escrowed Proceeds” means the 50% of the Proceeds to be placed into
escrow with the Subscription Receipt Agent on the Effective Date;

 

(s)                                  “Expiry Date” means the earliest of:

 

(i)                                     the date which is the third Business Day following the Qualification
Date; and

 

(ii)                                  the Final Qualification Deadline;

 

(t)                                    “Extraordinary Resolution” has the meaning attributed thereto in
sections 8.12 and 8.15 hereof;

 

(u)                                 “Final Prospectus” means the (final) prospectus of the Corporation
which qualifies the distribution of the Underlying Securities in the Qualifying
Jurisdictions and includes any amendments or supplements thereto;

 

(v)                                 “Final Qualification Deadline” means 5:00 p.m. (Mountain time)
on the first Business Day which is not less than 18 months after the date
hereof;

 

(w)                               “Initial Qualification Deadline” means 5:00 p.m. (Mountain
time) on the first Business Day which is not less than 12 months after the date
hereof;

 

(x)                                   “MRRS” means the mutual reliance review system established under
National Policy 43-201;

 

(y)                                 “National Policy 43-201” means National Policy 43-201 – Mutual Reliance Review System for Prospectuses and
Annual Information Forms;

 

(z)                                   “Penalty Deadline” means 5:00 p.m. (Mountain time) on the date
which is not less than 183 days after the date hereof;

 

(aa)                            “Permitted Investments” means short term investment grade debt
obligations as agreed to by the Corporation and the Agent;

 

(bb)                          “Person” includes an individual, corporation, partnership, trustee,
unincorporated organization or any other entity whatsoever, and words importing
persons have a similar extended meaning;

 

(cc)                            “Proceeds” means the gross proceeds received by the Corporation in
connection with the sale of the Subscription Receipts;

 

(dd)                          “Qualification Date” means the date on which the Release Conditions
are satisfied or waived by the Agent;

 

(ee)                            “Qualified U.S. Entity” means any
discretionary account or similar account (other than an estate or trust) held
for the benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if any individual) resident
in the United States; any estate of which any professional fiduciary acting as
executor or administrator is a U.S. person if (i) an executor or

 

4

 

administrator of the estate
who is not a U.S. person has sole or shared investment discretion with respect
to the assets of the estate; and (ii) the estate is governed by foreign
law; and any trust of which any professional fiduciary acting as trustee is a
U.S. person, if a trustee who is not a U.S. person has sole or shared
investment discretion with respect to the trust assets, and no beneficiary of
the trust (and no settler if the trust is revocable) if a U.S. person;

 

(ff)                                “Qualifying Jurisdictions” means the provinces of Canada where
purchasers of Subscription Receipts are located and any other jurisdiction in
Canada in which the Corporation is required to file the Final Prospectus
pursuant to an agreement between the Corporation and the Agent, or otherwise;

 

(gg)                          “Registration Statement” means the resale registration statement of
the Corporation to be filed with the SEC in order to register the resale of,
inter alia, the Common Shares, Warrants and to register the Common Shares
underlying the Warrants;

 

(hh)                          “Regulation D” means Regulation D under the U.S. Securities Act;

 

(ii)                                  “Regulation S” means Regulation S under the U.S. Securities Act;

 

(jj)                                  “Release Conditions” means the conditions to be satisfied prior to
automatic conversion of the Subscription Receipts, which shall be satisfied
upon the latest to occur of the following: (i) the third Business Day
after the date on which the Ontario Securities Commission, as the principal
regulator under National Policy 43-201 and the MRRS, issues a decision document
evidencing that each of the Securities Commissions has issued a receipt for the
Final Prospectus; (ii) the completion and filing via SEDAR of a current
technical report regarding the Tonkin Springs gold project that complies with
National Instrument 43-101 – Standards of Disclosure
for Mineral Projects of the Canadian Securities Administrators; (iii) the
Common Shares being listed for trading on the Toronto Stock Exchange; (iv) the
effectiveness of the Registration Statement; and (v) the delivery of a
10b-5 opinion, addressed to the Agent in a form satisfactory to the Agent,
acting reasonably, provided by United States counsel to the Corporation in
respect of the Registration Statement;

 

(kk)                            “Release Date” means the date on which the Subscription Receipt
Agent receives the Release Notice from the Corporation and the Agent;

 

(ll)                                  “Release Notice” means a written notice advising the Subscription
Receipt Agent that the Release Conditions have been satisfied or waived by the
Agent in the form set out in schedule B attached hereto and executed
by each of the Corporation and the Agent;

 

(mm)                      “Release Time” means the time the Subscription Receipt Agent
receives the Release Notice from the Corporation and the Agent;

 

(nn)                          “SEC” means the Securities and Exchange Commission in the United
States;

 

5

 

(oo)                          “Securities Commissions” means, collectively, the securities
regulatory authorities of the jurisdictions of Canada in which Subscription
Receiptholders reside;

 

(pp)                          “Share Rate” means the number of Common Shares which are issuable
upon the conversion of each Subscription Receipt in accordance with section 2.02
hereof, subject to adjustment in accordance with section 4.06 hereof;

 

(qq)                          “Stock Exchange” means the Toronto Stock Exchange;

 

(rr)                                “Subscription Receipts” means the subscription receipts created and
issued pursuant to subsections 2.01(a) and 2.01(b) hereof and
authorized for issue hereunder and represented by Subscription Receipt
Certificates issued and certified in accordance with the provisions hereof and
that have not at the particular time expired, been purchased by the Corporation
or converted;

 

(ss)                            “Subscription Receipt Agent” means Equity Transfer Services Inc.,
the party of the third part hereunder, including its successors and
assigns;

 

(tt)                                “Subscription Receipt Certificate” means a certificate representing
one or more Subscription Receipts substantially in the form of the
certificate attached hereto as schedule A;

 

(uu)                          “Subscription Receiptholders” or “holders” means the persons for the
time being entered in a register of holders described in section 3.01
hereof as holders of Subscription Receipts;

 

(vv)                          “Subscription Receiptholders’ Request” means an instrument, signed
in one or more counterparts by Subscription Receiptholders who hold in the
aggregate not less than 10% of the total number of Subscription Receipts then
outstanding, requesting the Subscription Receipt Agent to take some action or
proceeding specified therein;

 

(ww)                      “Subsidiary of the Corporation” means any corporation or other
corporate entity of which Voting Shares carrying more than 50% of the votes
attached to all outstanding Voting Shares of such corporation are owned,
directly or indirectly, other than by way of security only, by one or more of
the Corporation and any Subsidiary of the Corporation, regardless of whether
the Corporation or such Subsidiary of the Corporation is not contractually or
otherwise prohibited or restricted from exercising sufficient of the voting
rights attached to such Voting Shares to elect at least a majority of the
directors of such corporation;

 

(xx)                              “this Subscription Receipt Indenture”, “this Indenture”, “hereto”, “hereunder”,
“hereof’, “herein”, “hereby” and similar expressions mean or refer to this
Subscription Receipt Indenture and any indenture, deed or instrument
supplemental or ancillary hereto, and the expressions “article”, “section”, “subsection”,
“paragraph”, “subparagraph”, “clause” and “subclause” followed by a number mean
the specified article, section, subsection, paragraph, subparagraph, clause or
subclause of this Indenture;

 

6

 

(yy)                          “Time of Expiry” means 5:00 p.m. (Mountain time) on the Expiry
Date;

 

(zz)                              “Trading Day”, with respect to any stock exchange or
over-the-counter market, means a day on which shares may be traded through
the facilities of such stock exchange or in such over-the-counter market and
otherwise means a day on which shares may be traded through the facilities
of the principal stock exchange on which the Common Shares are then listed (or,
if the Common Shares are not then listed on any stock exchange, then in the
over-the-counter market);

 

(aaa)                      “Underlying Securities” means the Common Shares and the Warrants
issuable pursuant to the Subscription Receipts;

 

(bbb)                   “United States” means the United States, as that term is defined in Rule 902(1) of
Regulation S;

 

(ccc)                      “U.S. Person” means a U.S. person, as that term is defined in Rule 902(n)
Regulation S;

 

(ddd)                   “U.S. Purchaser” means (i) a person in the United States, or (ii) a
U.S. Person or person purchasing on behalf, or for the benefit or account, of
any U.S. Person or person in the United States;

 

(eee)                      “U.S. Prospectus” means a prospectus meeting the requirements of Section 10(a) of
the U.S. Securities Act, which will form part of the Registration
Statement;

 

(fff)                            “U.S. Securities Act” means the United States Securities Act of 1933, as amended;

 

(ggg)                   “Voting Shares” of any corporation means shares of one or more
classes or series of a class of shares of such corporation carrying
voting rights under all circumstances (and not by reason of the happening of a
contingency) sufficient if exercised to elect all of the directors of such
corporation, irrespective of whether or not shares of any other class or
classes shall have or may have the right to vote for directors by reason
of the happening of any contingency;

 

(hhh)                   “Warrant Indenture” means the warrant indenture to be entered into
between the Corporation and Equity Transfer Services Inc. governing the
Warrants and dated as of the date hereof;

 

(iii)                               “Warrant Shares” means the Common Shares issuable upon the exercise
of the Warrants;

 

(jjj)                               “Warrants” means the Common Share purchase warrants of the
Corporation issuable under the Warrant Indenture upon the conversion of the
Subscription Receipts and any exercise of the Agent’s Warrants, and, as of the
date hereof, each whole Warrant entitling the holder thereof to acquire one
Warrant Share at any time from the date of issue of the Warrants until 5:00 p.m.
(Mountain time) on the date which is five years after the date hereof at an
exercise price of $10.00, subject to adjustment in accordance with the
provisions of the Warrant Indenture; and

 

7

 

(kkk)                      “Written Order of the Corporation”, “Written Request of the
Corporation”, “Written Consent of the Corporation”, “Written Direction of the
Corporation” and “Certificate of the Corporation” mean a written order,
request, consent, direction and certificate, respectively, signed in the name
of the Corporation by any director or

 

officer of the Corporation or by any other individual
to whom such signing authority is delegated by the directors from time to time,
and may consist of one or more instruments so executed respectively.

 

Section 1.02                            Words
Importing the Singular

 

Words importing the singular include the
plural and vice versa and words
importing a particular gender or neuter include both genders and neuter.

 

Section 1.03                            Interpretation
Not Affected by Headings, Etc.

 

The division of this Indenture into
articles, sections, subsections, paragraphs, subparagraphs, clauses and
subclauses, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Indenture.

 

Section 1.04                            Day
Not a Business Day

 

If the day on or before which any action
which would otherwise be required to be taken hereunder is not a Business Day
in the place where the action is required to be taken, that action will be
required to be taken on or before the requisite time on the next succeeding day
that is a Business Day.

 

Section 1.05                            Time
of the Essence

 

Time will be of the essence in all respects
in this Indenture and the Subscription Receipt Certificates.

 

Section 1.06                            Currency

 

Except as otherwise stated, all dollar
amounts herein and in the Subscription Receipt Certificates are expressed in
United States dollars.

 

Section 1.07                            Applicable
Law

 

This Indenture and the Subscription Receipt
Certificates will be construed and enforced in accordance with the laws
prevailing in the Province of Ontario and the federal laws of Canada applicable
therein and will be treated in all respects as Ontario contracts.

 

ARTICLE TWO

THE SUBSCRIPTION RECEIPTS

 

Section 2.01                            Creation
and Issue of Subscription Receipts

 

(a)                                  Creation of Subscription Receipts:  16,700,000 Subscription Receipts entitling
the holders thereof to be issued, subject to adjustment in accordance with the
provisions of this Indenture, an aggregate of no more than 16,700,000 Common
Shares and 8,350,000 Warrants together with such additional indeterminate
number of Common Shares as may be required to be issued pursuant to any
adjustment required to be made by the provisions of section 4.06 hereof on
the

 

8

 

terms and subject to the conditions herein provided,
are hereby created and authorized for issue at a price of $4.50 for each
Subscription Receipt.

 

(b)                                 Certification of Subscription Receipts:  Upon the issue of the Subscription Receipts
and upon receipt of the issue price therefor, Subscription Receipt Certificates
shall be executed by the Corporation and delivered to the Subscription Receipt
Agent, certified by the Subscription Receipt Agent upon the Written Order of
the Corporation and delivered by the Subscription Receipt Agent to the
Corporation or to the order of the Corporation pursuant to a Written Direction
of the Corporation, without any further act of or formality on the part of
the Corporation and without the Subscription Receipt Agent receiving any
consideration therefor.

 

Section 2.02                            Terms
of Subscription Receipts

 

(a)                                  Conversion Terms:  Each Subscription Receipt issued hereunder
will entitle the holder thereof, upon the conversion thereof in accordance with
the provisions of Article Four hereof, and without payment of any
additional consideration, to be issued:

 

(i)                                     one Common Share and one-half of one Warrant; or

 

(ii)                                  if the Release Conditions have not been satisfied prior to the
Penalty Deadline, 1.1 Common Shares (in lieu of one Common Share) and 0.55
Warrants (in lieu of one-half of one Warrant).

 

(b)                                 Adjustment:  In addition to the adjustment to the number
of Common Shares and Warrants which shall be issued upon the conversion of the
Subscription Receipts contemplated by clause 2.02(a)(ii) hereof (for
purposes of this section 2.02(a)(ii), “Section 2.02 Adjustments”),
the number of Common Shares issued upon the conversion of the Subscription
Receipts in accordance with the provisions hereof will be adjusted in
accordance with section 4.06 hereof and the Warrants issued upon the
conversion of the Subscription Receipts will be adjusted in accordance with subsection 4.06(k)
hereof (for purposes of this section 2.02(a)(ii), collectively, the “Section 4.06
Adjustments”), on the following basis:

 

(i)                                     for any and all events giving rise to the Section 4.06
Adjustments which occur prior to the event giving rise to the Section 2.02
Adjustments, the Section 4.06 Adjustments shall be made before giving
effect to the Section 2.02 Adjustments; and

 

(ii)                                  for any and all events giving rise to the Section 4.06
Adjustments which occur after the event giving rise to the Section 2.02
Adjustments, the Section 4.06 Adjustments shall be made after giving
effect to the Section 2.02 Adjustments.

 

(c)                                  Purchase by Corporation:  The Corporation may from time to time
purchase Subscription Receipts by private agreement or otherwise, any such
purchase may be made in such manner, from such persons, at such prices and
on such terms as the Corporation in its sole discretion may determine.
Subscription Receipt Certificates representing Subscription Receipts purchased
by the Corporation

 

9

 

pursuant to this subsection 2.02(c) shall be
surrendered to the Subscription Receipt Agent for cancellation and shall be
accompanied by a Written Direction of the Corporation to cancel the
Subscription Receipts represented thereby.

 

(d)                                 Cancellation:  In the event that the Release Notice is not
delivered to the Subscription Receipt Agent prior to the Initial Qualification
Deadline, 50% of the Subscription Receipts held by each Subscription Receipt
Holder shall, without any action on the part of the holders thereof
(including the surrender of Subscription Receipt Certificates), be cancelled by
the Subscription Receipt Agent and holders of Subscription Receipt Certificates
shall thereafter have no rights thereunder, except to receive, and the
Subscription Receipt Agent shall pay to such holders from the Escrowed
Proceeds, an amount equal to $4.50 per Subscription Receipt so cancelled,
together with any interest accrued thereon (less any withholding tax required
to be withheld in respect thereof). The amount of $4.50 per Subscription
Receipt, together with any interest accrued thereon (less any withholding tax
required to be withheld in respect thereof), shall be returned to each holder
of a Subscription Receipt by the Subscription Receipt Agent in accordance with
subsection 6.03(b) hereof and the Corporation shall have no further
obligations with respect to any Subscription Receipts cancelled pursuant to
this section 2.02(d).

 

Section 2.03                            Form of
Subscription Receipt Certificates

 

(a)                                  Form: 
The Subscription Receipt Certificates (including the certificate of the
Subscription Receipt Agent endorsed thereon) will be substantially in the form of
the certificate attached hereto as Schedule A, will be dated as of the
date hereof (regardless of the actual dates of their issue), will bear such
distinguishing letters and numbers as the Corporation, with the approval of the
Subscription Receipt Agent, may prescribe and such legends as permitted
under this Indenture and will be issuable in any whole number denomination.

 

(b)                                 Production:  The Subscription Receipt Certificates may be
engraved, lithographed or printed (the expression “printed” including for
purposes hereof both original typewritten material as well as mimeographed, mechanically,
photographically, photostatically or electronically reproduced, typewritten or
other written material), or partly in one form and partly in another, as
the Corporation may determine.

 

(c)                                  Legends: 
Certificates representing Subscription Receipts, as well as all
certificates issued in exchange for or in substitution of such certificates
representing Subscription Receipts, shall bear the following legends:

 

“UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE
DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (I) FEBRUARY 22,
2006, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR
TERRITORY OF CANADA.”;

 

and

 

10

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (A) TO U.S. GOLD CORPORATION (“U.S. GOLD”), (B) OUTSIDE
THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER,
IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO U.S. GOLD
AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY
SATISFACTORY TO U.S. GOLD. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.

 

Section 2.04                            Signing
of Subscription Receipt Certificates

 

(a)                                  Signing Officers:  The Subscription Receipt Certificates shall
be signed by any one officer of the Corporation or any one director or by any
other individual to whom such signing authority is delegated by the directors
from time to time.

 

(b)                                 Signatures:  The signature of any officer of the
Corporation or director or any individual referred to in subsection 2.04(a) hereof
may be a manual signature, engraved, lithographed or printed in facsimile
and Subscription Receipt Certificates bearing such facsimile signature will,
subject to section 2.05 hereof, be binding on the Corporation as if they
had been manually signed by such officer of the Corporation or director or
individual.

 

(c)                                  No Longer Officer:  Notwithstanding that any individual whose
manual or facsimile signature appears on a Subscription Receipt Certificate as
one of the officers of the Corporation or directors referred to in subsection 2.04(a) hereof
no longer holds the same or any other office with, or is no longer a director
of, the Corporation at the date of issue of any Subscription Receipt
Certificate or at the date of certification or delivery thereof, such
Subscription Receipt Certificate will, subject to section 2.05 hereof, be
valid and binding on the Corporation.

 

Section 2.05                            Certification
by Subscription Receipt Agent

 

(a)                                  Certification:  No Subscription Receipt Certificate will be
issued or, if issued, will be valid or entitle the holder to the benefits
hereof until it has been certified by manual signature by or on behalf of the
Subscription Receipt Agent substantially in the form of the certificate
attached hereto as Schedule A or in such other form as may be
approved by the Subscription Receipt Agent. The certification by the
Subscription Receipt Agent on a Subscription Receipt Certificate will be
conclusive evidence as against the Corporation that such Subscription Receipt
Certificate has been issued hereunder and that the holder thereof is entitled
to the benefits hereof.

 

11

 

(b)                                 Certification No Representation:  The certification by the Subscription Receipt
Agent on any Subscription Receipt Certificate issued hereunder will not be
construed as a representation or warranty by the Subscription Receipt Agent as
to the validity of this Indenture or such Subscription Receipt Certificate
(except the due certification thereof) or as to the performance by the
Corporation of the obligations thereof under this Indenture, and the
Subscription Receipt Agent shall in no respect be liable or answerable for the
use made of any Subscription Receipt Certificate or of the consideration
therefor, except as otherwise specified herein.

 

Section 2.06                            Subscription
Receipts to Rank Pari Passu

 

All Subscription Receipts will rank pari passu, whatever may be the
actual dates of issue of the Subscription Receipt Certificates by which they
are represented.

 

Section 2.07                            Issue
in Substitution for Lost Certificates, Etc.

 

(a)                                  Substitution:  If any Subscription Receipt Certificate
becomes mutilated or is lost, destroyed or stolen, the Corporation, subject to
applicable law and to subsection 2.07(b) hereof, will issue, and
thereupon the Subscription Receipt Agent will certify and deliver, a new
Subscription Receipt Certificate of like denomination and tenor and bearing the
applicable legends as the one mutilated, lost, destroyed or stolen in exchange
for and in place of and on surrender and cancellation of such mutilated
certificate or in lieu of and in substitution for such lost, destroyed or
stolen certificate.

 

(b)                                 Cost of Substitution:  The applicant for the issue of a new
Subscription Receipt Certificate pursuant to this section 2.07 shall bear
the reasonable cost of the issue thereof and, in the case of loss, destruction
or theft, shall as a condition precedent to the issue thereof:

 

(i)                                     furnish to the Corporation and to the Subscription Receipt Agent
such evidence of ownership and of the loss, destruction or theft of the
Subscription Receipt Certificate to be replaced as is satisfactory to the
Corporation and to the Subscription Receipt Agent in their discretion, acting
reasonably;

 

(ii)                                  if so requested, furnish an indemnity in amount and form satisfactory
to the Corporation and to the Subscription Receipt Agent in their discretion,
acting reasonably; and

 

(iii)                               pay the reasonable charges of the Corporation and the Subscription
Receipt Agent in connection therewith.

 

Section 2.08                            Cancellation
of Surrendered Subscription Receipts

 

All Subscription Receipt Certificates
surrendered to the Subscription Receipt Agent in accordance with the provisions
of this Indenture will be cancelled by the Subscription Receipt Agent and, if
requested in writing by the Corporation, the Subscription Receipt Agent will
furnish the Corporation with a cancellation certificate identifying each Subscription
Receipt Certificate so cancelled, the number of

 

12

 

Subscription Receipts represented thereby
and the number of Common Shares and Warrants, if any, issued pursuant to such Subscription Receipts.

 

Section 2.09                            Subscription
Receiptholder not a Shareholder

 

Nothing in this Indenture or in the holding
of a Subscription Receipt represented by a Subscription Receipt Certificate, or
otherwise, shall be construed as conferring on any Subscription Receiptholder any
right or interest whatsoever as a shareholder of the Corporation, including but
not limited to any right to vote at, to receive notice of, or to attend, any
meeting of shareholders or any right to receive any Dividend Paid in the
Ordinary Course.

 

ARTICLE THREE

REGISTRATION, TRANSFER AND OWNERSHIP OF SUBSCRIPTION RECEIPTS

AND EXCHANGE OF SUBSCRIPTION RECEIPT CERTIFICATES

 

Section 3.01                            Registration
and Transfer of Subscription Receipts

 

(a)                                  Register:  The Corporation will cause to be kept by the
Subscription Receipt Agent at the principal office in Toronto, Ontario of the
Subscription Receipt Agent:

 

(i)                                     a register of holders in which shall be entered the names and
addresses of the holders of Subscription Receipts and particulars of the
Subscription Receipts held by them; and

 

(ii)                                  a register of transfers in which all transfers of Subscription
Receipts and the date and other particulars of each transfer shall be entered.

 

(b)                                 Transfer:  No transfer of any Subscription Receipt will
be valid unless entered on the register of transfers referred to in subsection 3.01(a) hereof,
or on any branch register maintained pursuant to subsection 3.01(g) hereof,
upon surrender to the Subscription Receipt Agent of the Subscription Receipt
Certificate representing such Subscription Receipt, with a properly completed
transfer form in substantially the form attached to the Subscription
Receipt Certificate executed by the registered holder or the executors,
administrators or other legal representatives thereof or the attorney thereof
duly appointed by an instrument in writing in form and executed in a
manner satisfactory to the Subscription Receipt Agent, and, upon compliance
with such requirements and such other reasonable requirements as the
Subscription Receipt Agent may prescribe, such transfer will be duly noted
on one of such registers by the Subscription Receipt Agent.

 

(c)                                  Register of Transfers:  The transferee of any Subscription Receipt
will, after surrender to the Subscription Receipt Agent of the Subscription
Receipt Certificate representing such Subscription Receipt as required by subsection 3.01(b) hereof
and upon compliance with all other conditions in respect thereof required by
this Indenture or by law, be entitled to be entered on the register of holders
referred to in subsection 3.01(a) hereof, or on any branch register
of holders maintained pursuant to subsection 3.01(g) hereof, as the
owner of such Subscription Receipt free from all equities or rights of set-off
or counterclaim between the Corporation and the transferor or any previous
holder of such

 

13

 

Subscription Receipt, except in respect of equities of
which the Corporation is required to take notice by statute or by order of a
court of competent jurisdiction.

 

(d)                                 Refusal of Registration:  The Corporation shall be entitled, and may direct
the Subscription Receipt Agent, to refuse to recognize any transfer, or enter
the name of any transferee, of any Subscription Receipt on the registers
referred to in subsection 3.01(a) hereof or on any branch register
maintained pursuant to subsection 3.01(g) hereof if such transfer
would constitute a violation of the securities laws of any jurisdiction or the
instruments, rules, regulations or policies of any regulatory authority
(including the Toronto Stock Exchange) having jurisdiction. In particular,
prior to the Registration Statement becoming effective, none of the Common
Shares and Warrants issuable on the exchange of the Subscription Receipts have
been registered under the 1933 Act and such securities may not be offered
or sold to a U.S. Person (except a Qualified U.S. Entity), a Person in the
United States or a Person for the account or benefit of a U.S. Person (except a
Qualified U.S. Entity), absent an exemption from the registration provisions of
the 1933 Act.

 

(e)                                  No Notice of Trusts:  Subject to applicable law, neither the
Corporation nor the Subscription Receipt Agent will be bound to take notice of
or see to the execution of any trust, whether express, implied or constructive,
in respect of any Subscription Receipt, and may transfer any Subscription
Receipt on the direction of the person registered as the holder thereof,
whether named as trustee or otherwise, as though that person were the
beneficial owner thereof.

 

(f)                                    Inspection:  The registers referred to in subsection 3.01(a) hereof,
and any branch register maintained pursuant to subsection 3.01(g) hereof,
will at all reasonable times be open for inspection by the Corporation and any
Subscription Receiptholder. The Subscription Receipt Agent will from time to
time when requested to do so in writing by the Corporation or any Subscription
Receiptholder (upon payment of the reasonable charges of the Subscription
Receipt Agent) furnish the Corporation or such Subscription Receiptholder with
a list of the names and addresses of holders of Subscription Receipts entered
on such registers and showing the number of Subscription Receipts held by each
such holder.

 

(g)                                 Location of Registers:  The Corporation may at any time and from
time to time change the place at which the registers referred to in subsection 3.01(a) hereof
are kept, cause branch registers of holders or transfers to be kept, in each
case subject to the approval of the Subscription Receipt Agent, at other places
and close such branch registers or change the place at which such branch
registers are kept. Notice of all such changes or closures shall be given by
the Corporation to the Subscription Receipt Agent and to the holders of
Subscription Receipts in accordance with section 11.02 hereof.

 

Section 3.02                            Exchange
of Subscription Receipt Certificates

 

(a)                                  Exchange:  One or more Subscription Receipt Certificates
may at any time prior to the Time of Expiry, on compliance with the
reasonable requirements of the Subscription Receipt Agent, be exchanged for one
or more Subscription Receipt Certificates of different denominations
representing in the aggregate the same

 

14

 

number of Subscription Receipts as the Subscription
Receipt Certificate or Subscription Receipt Certificates being exchanged.

 

(b)                                 Place of Exchange:  Subscription Receipt Certificates may be
exchanged only at the principal office in Toronto, Ontario of the Subscription
Receipt Agent or at any other place designated by the Corporation with the
approval of the Subscription Receipt Agent.

 

(c)                                  Cancellation:  Any Subscription Receipt Certificate tendered
for exchange pursuant to this section 3.02 shall be surrendered to the
Subscription Receipt Agent and cancelled.

 

(d)                                 Execution:  The Corporation will sign all Subscription
Receipt Certificates in accordance with section 2.04 hereof necessary to
carry out exchanges pursuant to this section 3.02 and such Subscription
Receipt Certificates will be certified by the Subscription Receipt Agent.

 

(e)                                  Subscription Receipt Certificates:
Subscription Receipt Certificates exchanged for Subscription Receipt
Certificates that bear any of the legends set forth in section 2.03 hereof
shall bear the same legends.

 

Section 3.03                            No
Charges for Transfer or Exchange

 

No charge will be levied on a presenter of
a Subscription Receipt Certificate pursuant to this Indenture for the transfer
of any Subscription Receipt or the exchange of any Subscription Receipt
Certificate.

 

Section 3.04                            Ownership
of Subscription Receipts

 

(a)                                  Owner: 
The Corporation and the Subscription Receipt Agent may deem and
treat the person in whose name any Subscription Receipt is registered as the
absolute owner of such Subscription Receipt for all purposes, and such person
will for all purposes of this Indenture be and be deemed to be the absolute
owner thereof, and the Corporation and the Subscription Receipt Agent will not
be affected by any notice or knowledge to the contrary, except as required by
statute or by order of a court of competent jurisdiction.

 

(b)                                 Rights of Registered Holder:  The registered holder of any Subscription
Receipt will be entitled to the rights represented thereby free from all
equities and rights of set-off or counterclaim between the Corporation and the
original or any intermediate holder thereof and all persons may act
accordingly, and the issue and delivery to any such registered holder of the
Common Shares and Warrants issuable pursuant thereto (or the payment of amounts
payable in respect thereof pursuant to subsection 2.02(d)) will be a good
discharge to the Corporation and the Subscription Receipt Agent therefor, and
neither the Corporation nor the Subscription Receipt Agent will be bound to
inquire into the title of any such registered holder.

 

15

 

ARTICLE FOUR

CONVERSION OF SUBSCRIPTION RECEIPTS

 

Section 4.01                            Conversion
of Subscription Receipts

 

(a)                                  Conversion by Subscription Receipt Agent:  Each Subscription Receipt will be converted
by the Subscription Receipt Agent for and on behalf of the holder thereof and
the holder thereof shall, without any action on the part of such holder
(including the surrender of any Subscription Receipt Certificate or payment of
any amount), be deemed to have subscribed for the Common Shares and Warrants
issuable upon the conversion of the Subscription Receipt immediately prior to
the Time of Expiry.

 

(b)                                 Rights on Conversion by Subscription Receipt Agent:  The holder of any
Subscription Receipt converted pursuant to subsection 4.01(a) hereof
shall have no rights thereunder, except to receive the certificates
representing the Common Shares and Warrants issued upon the conversion thereof
to such holder.

 

(c)                                  Direction of Subscription Receipt Agent:  The holders of Subscription Receipts hereby
irrevocably authorize and direct the Subscription Receipt Agent to convert the
Subscription Receipts thereof pursuant to subsection 4.01(a) hereof.

 

Section 4.02                            Effect
of Conversion

 

(a)                                  Effect of Conversion:  Upon the conversion of any Subscription
Receipts in accordance with section 4.01 hereof, the Common Shares and
Warrants thereby issuable will be deemed to have been issued, and the person or
persons to whom such Common Shares and Warrants are to be issued will be deemed
to have become the holder or holders of record thereof, on the Conversion Date,
unless the transfer registers maintained by or on behalf of the Corporation for
the Common Shares and Warrants are closed on that date, in which case such
Common Shares and Warrants will be deemed to have been issued, and such person
or persons will be deemed to have become the holder or holders of record
thereof, on the date on which such transfer registers are reopened, but such
Common Shares and Warrants will be issued on the basis of the number of Common
Shares and Warrants to which such person or persons were entitled on the
Conversion Date. The certificates representing the Common Shares and Warrants
which are issued to a holder of Subscription Receipts upon the conversion of
Subscription Receipts by the Subscription Receipt Agent pursuant to subsection 4.01(a) hereof
shall be issued in the name of such holder.

 

(b)                                 Mailing of Certificates:  Within three Business Days after the
Conversion Date, the Subscription Receipt Agent shall mail to the person or
persons in whose name or names the Common Shares and Warrants thereby issued
have been issued, at the respective addresses thereof, or, if so specified,
deliver to such person or persons at the place where a Subscription Receipt
Certificate representing Subscription Receipts was surrendered, certificates
representing the Common Shares and Warrants so issued.

 

16

 

(c)                                  Issue to Other than Holder:  If any Common Shares or Warrants issuable
pursuant to any Subscription Receipts are to be issued to a person or persons
other than the Subscription Receiptholder, the Subscription Receiptholder must
pay to the Corporation an amount equal to all exigible transfer taxes or other government
charges, and neither the Corporation nor the Subscription Receipt Agent shall
be required to issue or deliver any certificates representing any such Common
Shares or Warrants unless or until such amount has been so paid or the
Subscription Receiptholder has established to the satisfaction of the
Corporation in its discretion, acting reasonably, that such taxes and charges
have been paid or that no such taxes or charges are owing.

 

Section 4.03                            No
Fractional Common Shares or Warrants

 

The Corporation will not, whether pursuant
to an adjustment in accordance with section 4.06 hereof or under any other
circumstance, be obligated after the aggregation of the number of Common Shares
or Warrants to be issued to each holder of Subscription Receipts to issue any
fraction of a Common Share or Warrants on the conversion of Subscription
Receipts, and any such fraction shall be rounded down to the next whole number
of Common Shares or Warrants, as the case may be. A holder of Subscription
Receipts shall not be entitled to receive a cash payment or any other
compensation in respect of any such fraction of a Common Share or of a Warrant.

 

Section 4.04                            Recording:

 

The Subscription Receipt Agent will record
the particulars of each Subscription Receipt converted, which particulars will
include the name and address of each person to whom Common Shares and Warrants
are thereby issued, the number of Common Shares and Warrants so issued and the
Conversion Date in respect thereof. Within three Business Days after each Conversion
Date, the Subscription Receipt Agent will provide such particulars in writing
to the Corporation.

 

Section 4.05                            Securities
Restrictions

 

(a)                                  General: 
No Common Shares or Warrants will be issued pursuant to the conversion
of any Subscription Receipt if the issue of such Common Shares or Warrants
would constitute a violation of the securities laws of any jurisdiction and,
without limiting the generality of the foregoing, the certificates representing
the Common Shares or Warrants thereby issued will bear such legend or legends
as may, in the opinion of counsel to the Corporation, be necessary or advisable
in order to avoid a violation of any securities laws of any jurisdiction or to
comply with the requirements of any stock exchange on which the Common Shares
or Warrants are then listed, provided that if, at any time, in the opinion of
counsel to the Corporation, such legend or legends are no longer necessary or
advisable in order to avoid a violation of any such laws or requirements, or
the holder of any such legended certificate, at the expense thereof, provides
the Corporation with evidence satisfactory in form and substance to the
Corporation (which may include an opinion of counsel satisfactory to the
Corporation) to the effect that such holder is entitled to sell or otherwise
transfer such Common Shares or Warrants in a transaction in which such legend
or legends are not required, such legended certificate may thereafter be
surrendered to the Corporation in exchange for a certificate which does not
bear such legend or legends.

 

17

 

(b)                                 Canadian Legends:  Certificates representing Common Shares or
Warrants issued upon the conversion of Subscription Receipts after the Final
Qualification Deadline, and without the Ontario Securities Commission, as the
principal regulator under National Policy 43-201 and the MRRS, having issued a
decision document evidencing that each of the Securities Commissions has issued
a receipt for the Final Prospectus, shall bear the following legend:

 

“UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE
DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (I) FEBRUARY 22,
2006 AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR
TERRITORY OF CANADA.”.

 

If the Common Shares are also then listed
on the Toronto Stock Exchange. certificates representing the Common Shares will
also bear the following legend

 

“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID
SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.”

 

(c)                                  U.S. Legends:  Certificates representing Common Shares or
Warrants issued upon the conversion of Subscription Receipts after the Final
Qualification Deadline, and without the Registration Statement having been
declared effective by the SEC, shall bear the following legends:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (A) TO U.S. GOLD CORPORATION (“U.S. GOLD”), (B) OUTSIDE
THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER,
IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO U.S. GOLD
AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY
SATISFACTORY TO U.S. GOLD. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.”

 

If the Common Shares are also then listed
on the Toronto Stock Exchange. certificates representing the Common Shares will
also bear the following legend

 

18

 

“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID
SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.”

 

provided however, if the Underlying Securities are registered for
resale pursuant to an effective registration statement under the U.S.
Securities Act subsequent to the issue of the Underlying Securities and the
above resale restriction is therefore no longer applicable, then the holder may exchange
the certificates representing the Underlying Securities for certificates
bearing no such legend.

 

(d)                                 If upon the automatic conversion of the Subscription Receipts upon
the Final Qualification Deadline, the resale of the Warrants by the holder and
the issuance by the Corporation of the Warrant Shares upon exercise of the
Warrants are not registered by an effective registration statement under the
U.S. Securities Act, then the certificates representing the Warrants shall bear
the following legend:

 

“THIS WARRANT AND THE SECURITIES TO BE
ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THIS WARRANT MAY NOT
BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF ANY U.S. PERSON OR
PERSON IN THE UNITED STATES UNLESS SUCH EXERCISE IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO IT TO
SUCH EFFECT.”

 

If the Common Shares are also then listed
on the Toronto Stock Exchange. certificates representing the Common Shares will
also bear the following legend

 

“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID
SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.”

 

Section 4.06                            Adjustments

 

(a)                                  Adjustment:  The rights of the holder of any Subscription
Receipt, including the number of Common Shares issuable upon the conversion or
deemed conversion of such Subscription Receipt, will be adjusted from time to
time in the events and in the manner provided in, and in accordance with the
provisions of, this section, with adjustments in respect of the Warrants being
made in the manner described in subsection 4.06(k) hereof.

 

19

 

(b)                                 The Share Rate in effect at any date will be subject to adjustment
from time to time as follows:

 

(i)                                     Share Reorganization:  If, and whenever at any time during the
Adjustment Period, the Corporation shall (A) subdivide or redivide the
outstanding Common Shares into a greater number of Common Shares, (B) consolidate
or combine the outstanding Common Shares into a lesser number of Common Shares,
or (C) issue Common Shares (or securities convertible or exchangeable into
Common Shares) to all or substantially all of the holders of Common Shares by
way of a stock dividend or other distribution, then, in each such event, the
Share Rate will, on the record date for such event or, if no record date is
fixed, the effective date of such event, be adjusted so that it will equal the
rate determined by multiplying the Share Rate in effect immediately prior to
such date by a fraction, of which the denominator shall be the total number of
Common Shares outstanding on such date before giving effect to such event, and
of which the numerator shall be the total number of Common Shares outstanding
on such date after giving effect to such event (including Common Shares into
which such convertible or exchangeable securities by way of stock dividend may be
issued). Such adjustment will be made successively whenever any such event
shall occur. Any such issue of Common Shares by way of a stock dividend shall
be deemed to have been made on the record date for such stock dividend for the
purpose of calculating the number of outstanding Common Shares under
clauses 4.06(b)(i) and (ii) hereof.

 

(ii)                                  Rights Offering:  If, and whenever at any time during the
Adjustment Period, the Corporation shall fix a record date for the issue of
rights, options or warrants to all or substantially all of the holders of
Common Shares entitling the holders thereof, within a period expiring not more
than 45 days after the record date for such issue, to subscribe for or purchase
Common Shares (or securities convertible into or exchangeable for Common
Shares) at a price per share (or having a conversion or exchange price per
share) less than 95% of the Current Market Price on the earlier of such record
date and the date on which the Corporation announces its intention to make such
issue, then, in each such case, the Share Rate will be adjusted immediately
after such record date so that it will equal the rate determined by multiplying
the Share Rate in effect on such record date by a fraction, of which the
denominator shall be the total number of Common Shares outstanding on such
record date plus the number arrived at when (A) either the product of (1) the
number of Common Shares offered for subscription and (2) the price at
which those Common Shares are offered, or the product of (3) the
conversion price thereof and (4) the maximum number of Common Shares for
or into which the convertible or exchangeable securities so offered pursuant to
the rights offering may be converted or exchanged, as the case may be,
is divided by (B) the Current Market Price on the record date, and of
which the numerator shall be the total number of Common Shares outstanding on
such record date plus the total number of additional Common Shares so offered
for subscription or purchase (or into or for which the convertible or
exchangeable securities so offered are convertible or

 

20

 

exchangeable). Any Common Shares owned by or held for
the account of the Corporation or any Subsidiary of the Corporation shall be
deemed not to be outstanding for the purpose of any such computation. Such
adjustment will be made successively whenever such a record date is fixed,
provided that if two or more such record dates or record dates referred to in
clause 4.06(b)(iii) hereof are fixed within a period of 25 Trading Days,
such adjustment will be made successively as if each of such record dates
occurred on the earliest of such record dates. To the extent that any such
rights, options or warrants are not exercised prior to the expiration thereof,
the Share Rate will then be readjusted to the Share Rate which would then be in
effect based upon the number of Common Shares (or securities convertible into
or exchangeable for Common Shares) actually issued upon the exercise of such
rights, options or warrants, as the case may be.

 

(iii)                               Distribution:  If, and whenever at any time during the
Adjustment Period, the Corporation shall fix a record date for the making of a
distribution to all or substantially all of the holders of Common Shares of (A) shares
of any class other than Common Shares whether of the Corporation or any
other corporation, (B) rights, options or warrants to acquire Common Shares
or securities exchangeable for or convertible into Common Shares or property or
other assets or the Corporation (other than rights, options or warrants
exercisable by the holders thereof within a period expiring not more than 45
days after the record date for such issue or distribution to acquire Common
Shares or securities exchangeable for or convertible into Common Shares at a
price per share, or at an exchange or conversion price per share in the case of
securities exchangeable for or convertible into Common Shares, of at least 95%
of the Current Market Price of the Common Shares on such record date), (C) evidences
of indebtedness, or (D) cash, securities or other property or assets then,
in each such case, the Share Rate will be adjusted immediately after such
record date so that it will equal the rate determined by multiplying the Share
Rate in effect on such record date by a fraction, of which the denominator
shall be the total number of Common Shares outstanding on such record date
multiplied by the Current Market Price on the earlier of such record date and
the date on which the Corporation announces its intention to make such
distribution, less the aggregate fair market value (as determined by the
directors, acting reasonably, at the time such distribution is authorized) of
such shares or rights, options or warrants or evidences of indebtedness or
cash, securities or other property or assets so distributed, and of which the
numerator shall be the total number of Common Shares outstanding on such record
date multiplied by such Current Market Price. Any Common Shares owned by or
held for the account of the Corporation or any Subsidiary of the Corporation
shall be deemed not to be outstanding for the purpose of any such computation.
Such adjustment will be made successively whenever such a record date is fixed,
provided that if two or more such record dates or record dates referred to in
clause 4.06(b)(ii) hereof are fixed within a period of 25 Trading Days,
such adjustment will be made successively as if each of such record dates
occurred on the earliest of such record dates. To the extent that any such
rights, options or warrants so distributed are not

 

21

 

exercised prior to the expiration thereof, the Share
Rate will then be readjusted to the Share Rate which would then be in effect
based upon such rights, options or warrants or evidences of indebtedness or
cash, securities or other property or assets actually distributed or based upon
the number or amount of securities or the property or assets actually issued or
distributed upon the exercise of such rights, options or warrants, as the case may be.

 

(c)                                  Reclassifications:  If and whenever at any time during the
Adjustment Period, there is (A) any reclassification of the outstanding
Common Shares, any change of the Common Shares into other shares or any other
reorganization of the Corporation (other than as described in subsection 4.06(b) hereof),
(B) any consolidation, amalgamation, arrangement, merger or other form of
business combination of the Corporation with or into any other corporation or
other entity resulting in any reclassification of the outstanding Common
Shares, any change of the Common Shares into other shares or any other
reorganization of the Corporation, or (C) any sale, lease, exchange or
transfer of the undertaking or assets of the Corporation as an entirety or
substantially as an entirety to another corporation or entity, then, in each
such event, each holder of any Subscription Receipt which is thereafter
exchanged will be entitled to receive, and shall accept, in lieu of the number
of Common Shares to which such holder was theretofor entitled upon such
exchange, the kind and number or amount of shares or other securities or
property which such holder would have been entitled to receive as a result of
such event if, on the effective date thereof, such holder had been the
registered holder of the number of Common Shares to which such holder was
theretofor entitled upon such conversion or exchange. If necessary as a result
of any such event, appropriate adjustments will be made in the application of
the provisions set forth in this subsection 4.06(c) with respect to
the rights and interests thereafter of the holders of Subscription Receipts to
the end that the provisions set forth in this subsection 4.06(c) will
thereafter correspondingly be made applicable, as nearly as may reasonably
be, in the relation to any shares or other securities or property thereafter
deliverable upon the exercise of any Subscription Receipt. Any such adjustments
will be set forth in an indenture supplemental hereto with the successor to the
Corporation or such corporation or other entity, as applicable,
contemporaneously with such reclassification, consolidation, amalgamation,
arrangement, merger, other form of business combination or other event and
which supplemental indenture shall be approved by the directors, acting
reasonably, and shall for all purposes be conclusively deemed to be an
appropriate adjustment and such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to
the adjustments provided in this section 4.06 and which shall apply to
successive reclassifications, reorganizations, amalgamations, mergers, other
forms of business combination or other events. The Corporation, its successor
or such corporation or other entity, as the case may be, shall also, prior
to or contemporaneously with any such event, enter into a supplemental
indenture substantially in the form of the Warrant Indenture with respect
to the rights and interest thereafter of the holders of the Warrants to the end
of the provisions set forth in the Warrant Indenture shall thereafter
correspondingly be made applicable, as nearly as reasonably be, with any shares
or other securities or property to which the holders of the Warrants would be
entitled on exercise of acquisition rights thereunder.

 

22

 

(d)                                 Deferral of Adjustment:  In any case in which this section 4.06
shall require that an adjustment shall become effective immediately after a
record date for or an effective date of an event referred to herein, the
Corporation may defer, until the occurrence and consummation of such
event, issuing to the holder of any Subscription Receipt exchanged after such
record date or effective date and before the occurrence and consummation of
such event the additional Common Shares, Warrants or other securities or
property issuable upon such exchange by reason of the adjustment required by
such event, provided, however, that the Corporation will deliver to such holder
an appropriate instrument evidencing such holder’s right to receive such
additional Common Shares, Warrants or other securities or property upon the
occurrence and consummation of such event and the right to receive any dividend
or other distribution in respect of such additional Common Shares, Warrants or
other securities or property declared in favour of the holders of record of
Common Shares, Warrants or of such other securities or property on or after the
Conversion Date or such later date as such holder would, but for the provisions
of this subsection, have become the holder of record of such additional Common
Shares, Warrants or of such other securities or property pursuant to subsection 4.02(a) hereof.

 

(e)                                  Adjustments Cumulative:  The adjustments provided for in this section 4.06
are cumulative, shall, in the case of any adjustment to the Share Rate, be
computed to the nearest one one-hundredth of a Common Share and will apply
(without duplication) to successive subdivisions, consolidations,
distributions, issues or other events resulting in any adjustment under the
provisions of this section 4.06, provided that, notwithstanding any other
provision of this section, no adjustment of the Share Rate will be required (i) unless
such adjustment would require an increase or decrease of at least 1% in the
Share Rate then in effect (provided, however, that any adjustment which by
reason of this subsection 4.06(e) is not required to be made will be
carried forward and taken into account in any subsequent adjustment), (ii) if,
in respect of any event described in this section 4.06 (other than the
events referred to in clauses (A) and (B) of clause 4.06(b)(i) hereof
and in subsection 4.06(c) hereof), the holders of Subscription
Receipts are entitled to participate in such event, or are entitled to
participate within 45 days in a comparable event, on the same terms, with the
necessary changes, as if the Subscription Receipts had been exercised prior to
or on the effective date of or record date for such event, (iii) in
respect of any Common Shares issuable or issued pursuant to any stock option or
any stock option or stock purchase plan in force from time to time for
directors, officers or employees of the Corporation or of Subsidiaries of the
Corporation, or (iv) in respect of any Common Shares issuable or issued
pursuant to the conversion of Subscription Receipts or the exercise of
Warrants.

 

(f)                                    Resolution of Questions:  If any question arises with respect to the
adjustments provided in this section 4.06, such question shall be
conclusively determined by the Corporation’s auditors or, if they are unable or
unwilling to act, by such firm of chartered accountants as is appointed by the
Corporation and is acceptable to the Subscription Receipt Agent. Such
accountants shall have access to all necessary records of the Corporation and
such determination shall be binding upon the Corporation, the Subscription Receipt
Agent and the Subscription Receiptholders.

 

23

 

(g)                                 Other Actions:  If, and whenever at any time during the
Adjustment Period, the Corporation shall take any action affecting or relating
to the Common Shares, other than any action described in this section 4.06,
which in the opinion of the directors would prejudicially affect the rights of
holders of Subscription Receipts, the Share Rate will be adjusted by the
directors in such manner, if any, and at such time, as the directors may reasonably
determine to be equitable in the circumstances to such holders.

 

(h)                                 Additional Actions:  As a condition precedent to the taking of any
action which would require an adjustment in any of the rights under the
Subscription Receipts, the Corporation will take any action which may, in the
opinion of counsel to the Corporation, be necessary in order that the
Corporation, or any successor to the Corporation or successor to the
undertaking or assets of the Corporation, will be obligated to and may validly
and legally issue all the Common Shares, Warrants or other securities or
property which the holders of Subscription Receipts would be entitled to
receive thereafter on the exercise thereof in accordance with the provisions hereof.

 

(i)                                     Notice to Subscription Receipt Agent:  At least ten days before the earlier of the
effective date of or record date for any event referred to in this section 4.06
that requires or might require an adjustment in any of the rights under the
Subscription Receipts, the Corporation will:

 

(i)                                     file with the Subscription Receipt Agent a Certificate of the
Corporation specifying the particulars of such event and, to the extent
determinable, any adjustment required and the computation of such adjustment;
and

 

(ii)                                  give notice to the Subscription Receiptholders of the particulars of
such event and, to the extent determinable, any adjustment required, in
accordance with subsection 11.02(a) hereof.

 

Such notice need only set forth such
particulars as have been determined at the date such notice is given. If any
adjustment for which such notice is given is not then determinable, promptly
after such adjustment is determinable the Corporation will:

 

(iii)                               file with the Subscription Receipt Agent a Certificate of the
Corporation showing the computation of such adjustment; and

 

(iv)                              give notice to the Subscription Receiptholders of such adjustment in
accordance with subsection 11.02(a) hereof.

 

Where a notice pursuant to this subsection 4.06(i) has
been given, the Subscription Receipt Agent shall be entitled to act and rely on
any adjustment calculation of the Corporation or of the Corporation’s auditors.

 

(j)                                     Duty of Subscription Receipt Agent:  Subject to subsection 10.02(a) hereof,
the Subscription Receipt Agent shall not:

 

(i)                                     at any time be under any duty or responsibility to any Subscription
Receiptholder to determine whether any facts exist which may require any
adjustment in the Share Rate, or with respect to the nature or extent

 

24

 

of any such adjustment when made, or with respect to
the method employed in making such adjustment;

 

(ii)                                  be accountable with respect to the validity or value (or the kind or
amount) of any Common Shares, Warrants or of any shares or other securities or
property which may at any time be issued or delivered upon the exercise of
any Subscription Receipt; or

 

(iii)                               be responsible for any failure of the Corporation to make any cash
payment or to issue, transfer or deliver Common Shares or share certificates,
Warrants, or certificates representing the Warrants upon the surrender of any
Subscription Receipts for the purpose of exercise, or to comply with any of the
covenants contained in this section.

 

(k)                                  Adjustments in Respect of Warrants:  In the event that, at any time prior to the
issue of Warrants in accordance with the Warrant Indenture in the circumstances
required under this Indenture, there shall have occurred one or more events
which, if any Warrant was outstanding, would require an adjustment or
adjustments thereto or to the exercise price thereof in accordance with the
provisions of the Warrant Indenture, then, notwithstanding anything to the
contrary herein and notwithstanding that no Warrants may be outstanding at
the applicable time under the Warrant Indenture, at the time of the issue of
Warrants upon the conversion of Subscription Receipts, the same adjustment or
adjustments in accordance with the adjustment provisions of the Warrant
Indenture shall be made to the Warrants issuable upon the conversion of
Subscription Receipts, mutatis mutandis,
as if such Warrants were outstanding and governed by the Warrant Indenture upon
the occurrence of such event or events.

 

ARTICLE FIVE

COVENANTS

 

Section 5.01                            General
Covenants

 

The Corporation covenants with the
Subscription Receipt Agent that so long as any Subscription Receipts remain
outstanding:

 

(a)                                  Maintenance:  The Corporation will use its commercially
reasonable efforts to at all times maintain its corporate existence and keep or
cause to be kept proper books of account in accordance with generally accepted
accounting principles in the United States or Canada.

 

(b)                                 Reservation of Common Shares:  The Corporation will reserve and
conditionally allot for the purpose and keep available sufficient unissued
Common Shares to enable it to satisfy its obligations on the conversion of the
Subscription Receipts and the exercise of the Warrants.

 

(c)                                  Issue of Common Shares and Warrants:  The Corporation will cause the Common Shares
and Warrants from time to time issued pursuant to the conversion of the
Subscription Receipts and the exercise of Warrants, and the certificates
representing such Common Shares and Warrants, to be issued and

 

25

 

delivered in accordance with the provisions of this
Indenture and the terms hereof and all Common Shares that are issued on the
conversion of the Subscription Receipts and upon the exercise of Warrants will
be fully paid and non-assessable shares.

 

(d)                                 Open Registers:  The Corporation will cause the Subscription
Receipt Agent to keep open the registers of holders and registers of transfers
referred to in section 3.01 hereof as required by such section and
will not take any action or omit to take any action which would have the effect
of preventing the Subscription Receiptholders from converting any of the
Subscription Receipts or receiving any of the Common Shares and Warrants issued
upon such conversion.

 

(e)                                  Filings: 
The Corporation will make all requisite filings, including filings with
appropriate securities commissions and stock exchanges, in connection with the
conversion of the Subscription Receipts and the issue of the Common Shares and
Warrants in connection therewith.

 

(f)                                    Reporting:  The Corporation shall file within the time
required by the U.S. Securities Act and the rules and regulations
thereunder:

 

(i)                                   unaudited interim condensed financial statements for each quarter
(including management’s discussion and analysis);

 

(ii)                                audited annual financial statements (including management’s
discussion and analysis) for each fiscal year; and

 

(iii)                             such other reports and documents as may be required thereunder;
and

 

(g)                                 Notice of Receipt:  The Corporation will send or cause to be sent
to each Subscription Receiptholder a written notice advising of the issuance of
a receipt for the Final Prospectus by each of the Securities Commissions,
together with a copy of the Final Prospectus and such notice shall be sent
within three Business Days after the date on which the receipt is issued by the
last of the Securities Commissions.

 

(h)                                 Notice of Penalty Deadline:  If the Release Conditions shall not have been
satisfied on or prior to the Penalty Deadline, the Corporation shall send or
cause to be sent to each registered holder of Subscription Receipts a written
notice advising that such holder has the right to receive, upon the subsequent
conversion thereof, 1.1 Common Shares (in lieu of one Common Share) and 0.55
Warrants (in lieu of one-half of one Warrant) pursuant to each Subscription
Receipt and such notice shall be sent within three Business Days after the
Penalty Deadline.

 

(i)                                     Notice of Initial Qualification Deadline:  If the Release Conditions shall not have been
satisfied on or prior to the Initial Qualification Deadline, the Corporation
shall send or cause to be sent to each holder of Subscription Receipts written
notice advising of that fact and that 50% of the Subscription Receipts held by
each Subscription Receipt Holder have been cancelled by the Subscription
Receipt Agent and each holder of Subscription Receipts will be entitled to
receive their pro rata share of the Escrowed
Funds being an amount equal to $4.50 per Subscription Receipt so cancelled,
together with interest thereon from

 

26

 

 

the Subscription Receipt Agent (less any applicable
withholding tax thereon), and such notice shall be sent within three Business
Days after the Initial Qualification Deadline.

 

(j)                                     Release Conditions:  The
Corporation will use its reasonable commercial efforts to satisfy the Release
Conditions.

 

(k)                                  General Performance:  Generally, the Corporation, using reasonable
commercial efforts, will well and truly perform and carry out all acts and
things to be done by it as provided in this Indenture or in order to consummate
the transactions contemplated hereby.

 

(l)                                     Reporting Issuer Status:  It will use its commercially reasonable
efforts to maintain its status as a reporting issuer or equivalent not in
default, and not be in default in any material respect of the applicable
requirements of, the applicable securities laws of the applicable jurisdiction
of Canada and the federal securities laws of the United States, provided that
the foregoing shall apply from the date that the Corporation becomes a
reporting issuer in a jurisdiction of Canada.

 

(m)                               Filing Registration Statement:  The Corporation shall use its commercially
reasonable efforts to file and cause the Registration Statement to be declared
effective by no later than the Final Qualification Deadline, and thereafter
shall cause the Registration Statement to remain effective and available for
use by the holders until the later of two years from the date hereof in respect
of the Prospectus and a date which is 10 days after all of the Warrants have
been exercised.

 

(n)                                 Filing Final Prospectus:   The Corporation shall use its commercially
reasonable efforts to file and cause the Ontario Securities Commission, as the
principal regulator under National Policy 43-201 and the MRRS, to issue a
decision document evidencing that each of the Securities Commissions has issued
a receipt for the Final Prospectus by no later than the Final Qualification
Deadline

 

(o)                                 Notice if Registration Statement Not Effective:  If at any time a previously
effective Registration is no longer effective, the Corporation will give notice
to the Subscription Receipt Agent forthwith and will give notice, in accordance
with the provisions set out in section 11.01, as soon as reasonably
practicable, but in any event within five Business Days, after learning that
such Registration Statement is no longer effective.

 

(p)                                 Further Acts. If, in the opinion of
outside 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 securities administrator, regulatory agency
or governmental authority in Canada or the United States or any other step is
required under any federal or provincial law of Canada or any federal or state
law of the United States before the Common Shares issuable upon exercise of the
Warrants may be issued or delivered to a Warrantholder, the Corporation
will use its reasonable commercial efforts to file such instrument, obtain such
permission, order or ruling or take all such other actions, at its expense, as
are required.

 

27

 

Any notices or deliveries required to be
provided to holders of Subscription Receipts hereunder shall be sent by prepaid
mail or delivery to each holder of Subscription Receipts at the address of such
holder appearing on the register of Subscription Receipts maintained hereunder.

 

Section 5.02                            Remuneration
and Expenses of Subscription Receipt Agent

 

The Corporation will pay to the
Subscription Receipt Agent from time to time reasonable remuneration for the
services of the Subscription Receipt Agent hereunder and will, on the request
of the Subscription Receipt Agent, pay to or reimburse the Subscription Receipt
Agent for all reasonable expenses, disbursements and advances made or incurred
by the Subscription Receipt Agent in the administration or execution of the
duties and obligations hereof (including reasonable compensation and
disbursements of its counsel and other advisers and assistants not regularly in
the employment thereof), both before any default hereunder and thereafter until
all duties of the Subscription Receipt Agent hereunder have been finally and
fully performed, except any such expense, disbursement or advance that arises
out of or results from negligence, wilful misconduct or bad faith of the
Subscription Receipt Agent or of persons for whom the Subscription Receipt
Agent is responsible or has retained. In no event shall any amount payable to
the Subscription Receipt Agent hereunder be paid out of the Escrowed Proceeds
or accrued interest thereon unless the Escrowed Proceeds and accrued interest
are, at the time of payment, payable to the Corporation.

 

Section 5.03                            Securities
Qualification Requirements

 

(a)                                  If, in the opinion of counsel, any instrument is required to be
filed with, or any permission is required to be obtained from any governmental
authority in Canada or the United States or any other step is required under
any federal or provincial law of Canada, or federal or state law of the United
States, before any Underlying Securities which a Subscription Receiptholder is
entitled to acquire pursuant to the conversion of any Subscription Receipt may properly
and legally be issued upon due conversion thereof, the Corporation covenants
that, using reasonable commercial efforts, it will promptly take such required
action.

 

(b)                                 Notice of Qualification Date:  The Corporation will, no later than one
Business Day after the Qualification Date, give notice of the Qualification
Date to the Subscription Receipt Agent and the Corporation will give, or cause
the Subscription Receipt Agent to give, notice of the Qualification Date to the
holders of Subscription Receipts no later than three Business Days after
receipt by the Subscription Receipt Agent of such notice from the Corporation.

 

Section 5.04                            Notice
of Issue

 

The Corporation will give written notice of
and make all requisite filings respecting the issue of securities pursuant to
the exercise of any Subscription Receipts, in such detail as may be
required, to each securities commission, stock exchange, or similar regulatory
authority in each jurisdiction in Canada and the United States in which there
is legislation or regulations requiring the giving of any such notice in order
that such issue of securities and the subsequent disposition of the securities
so issued will not be subject to the prospectus requirements, if any, of such
legislation or regulations.

 

Section 5.05                            Performance
of Covenants by Subscription Receipt Agent

 

If the Corporation fails to perform any
of the obligations thereof under this Indenture, the Subscription Receipt Agent
may notify the Subscription Receiptholders of such failure or may itself
perform any of

 

28

 

such obligations capable of being performed
by the Subscription Receipt Agent, but will not be bound to do so or to notify
the Subscription Receiptholders that it is so doing. All amounts expended or
advanced by the Subscription Receipt Agent in so doing will be repayable as
provided in section 5.02 hereof. No such performance, expenditure or
advance by the Subscription Receipt Agent will relieve the Corporation of any
default or of its continuing obligations hereunder.

 

ARTICLE SIX

DEPOSIT OF PROCEEDS AND

CANCELLATION OF SUBSCRIPTION RECEIPTS

 

Section 6.01                            Deposit
of Escrowed Proceeds

 

Contemporaneous with the issue of the
Subscription Receipts, the Escrowed Proceeds shall be deposited with the
Subscription Receipt Agent and retained by the Subscription Receipt Agent in a
segregated account in accordance with the provisions of this Article Six.
The Corporation acknowledges and agrees that it is a condition of the payment
by the holders of Subscription Receipts of the issue price therefor that the
Escrowed Funds are held in escrow by the Subscription Receipt Agent in
accordance with the provisions of this Article Six. The Corporation
further acknowledges and confirms that it has no interest in the Escrowed Funds
or in the interest thereon unless and until the Release Notice is delivered to
the Subscription Receipt Agent. The Subscription Receipt Agent shall retain the
Escrowed Funds and the interest thereon for the benefit of the holders of
Subscription Receipts and, upon the delivery of the Release Notice to the
Subscription Receipt Agent, retroactively for the benefit of the Corporation
and the Agent, in accordance with the provisions of this Article Six.

 

Section 6.02                            Investment
of Escrowed Funds

 

The Escrowed Funds pending any release or
application thereof as required in accordance with the provisions of this Article Six,
shall be invested by the Subscription Receipt Agent in the name thereof in
Permitted Investments in accordance with any written direction given by the
Corporation and the Agent from time to time to the Subscription Receipt Agent
or, in the absence of any such direction, shall be held by the Subscription
Receipt Agent in accordance with subsection 10.04(b) hereof.

 

Section 6.03                            Release
of Escrowed Proceeds

 

The Subscription Receipt Agent shall
release the Escrowed Proceeds and any interest accrued thereon by certified
cheque, bank draft or wire transfer, as follows in the following circumstances:

 

(a)                                  immediately after the Release Time as provided for in the Release
Notice:

 

(i)                                     the amount of $2,630,250.00 (plus accrued interest thereon) shall be
released by the Subscription Receipt Agent to the Agent;

 

(ii)                                  an amount payable to the Subscription Receipt Agent equal to its
reasonable fees for services rendered and disbursements incurred; and

 

(iii)                               all of the remaining Escrowed Proceeds together with the interest on
the Escrowed Proceeds shall be released by the Subscription Receipt Agent to or
at the direction of the Corporation; and

 

(b)                                 in the event that the Release Conditions have not been satisfied
prior to the Initial Qualification Deadline, the Subscription Receipt Agent
shall pay the amount of

 

29

 

$4.50 per Subscription Receipt, together with any
interest earned thereon less any withholding tax required to be withheld in
respect thereof, to holders of Subscription Receipts using the Escrowed Funds
and the Subscription Receipt Agent shall, within three Business Days of the
Initial Qualification Deadline, mail or deliver, or cause to be mailed or
delivered, to the Subscription Receiptholders cheques in the amounts payable to
the respective Subscription Receiptholders at the address on the register of
holders of Subscription Receipts provided herein.

 

Section 6.04                            Escrowed
Proceeds Held by the Subscription Receipt Agent

 

In addition to the other rights granted to
holders of Subscription Receipts in this Indenture, until the Release Time,
each holder of Subscription Receipts has a pro rata claim
against the Escrowed Funds, which claim shall subsist until such time as the
Common Shares and Warrants issuable upon the conversion of such Subscription
Receipt are issued or such amount is paid in full. In the event that, prior to
the Release Time, the Corporation: (i) makes a general assignment for the
benefit of creditors or any proceeding is instituted by the Corporation seeking
relief on behalf thereof as a debtor, or to adjudicate the Corporation a
bankrupt or insolvent, or seeking liquidation, winding-up, reorganization,
arrangement, adjustment or composition of the Corporation or the debts of the
Corporation under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, receiver and manager,
trustee, custodian or similar official for the Corporation or any substantial part of
the property and assets the Corporation or the Corporation takes any corporate
action to authorize any of the actions set forth above; or (ii) the
Corporation shall be declared bankrupt, or a receiver, receiver and manager,
trustee, custodian or similar official is appointed for the Corporation or any
substantial part of its property and assets the Corporation or an
encumbrancer shall legally take possession of any substantial part of the
property or assets of the Corporation or a distress or execution or any similar
process is levied or enforced against such property and assets and remains
unsatisfied for such period as would permit such property or such part thereof
to be sold thereunder, the right of each holder of Subscription Receipts to be
issued Common Shares and Warrants upon the conversion of the Subscription
Receipts of such holder will terminate and such holder will be entitled to
assert a claim against the Escrowed Proceeds held in escrow in an amount equal
to $4.50 for each Subscription Receipt held by such holder plus interest earned
thereon less any withholding tax or charges required to be withheld in respect
thereof.

 

Section 6.05                            Role
as Subscription Receipt Agent

 

The Subscription Receipt Agent accepts its
duties and responsibilities under this Indenture solely as a custodian, bailee
and agent, and no trust is intended to be, or is or will be, created hereby and
the Subscription Receipt Agent shall owe no duty hereunder as a trustee.

 

ARTICLE SEVEN

ENFORCEMENT

 

Section 7.01                            Suits
by Subscription Receiptholders

 

All or any of the rights conferred on the
holder of any Subscription Receipt by the terms of the Subscription Receipt
Certificate representing such Subscription Receipt or of this Indenture may be
enforced by such holder by appropriate legal proceedings but without prejudice
to the right which is hereby conferred on the Subscription Receipt Agent to
proceed in the name thereof or on behalf of the holders of Subscription
Receipts to enforce each and every provision herein contained for the benefit
of the Subscription Receiptholders.

 

30

 

Section 7.02                            Limitation
of Liability

 

The obligations hereunder are not
personally binding on, nor will resort hereunder be had to the private property
of, any past, present or future director, shareholder, officer, employee or
agent of the Corporation, but only the property of the Corporation shall be
bound in respect hereof.

 

ARTICLE EIGHT

MEETINGS OF SUBSCRIPTION RECEIPTHOLDERS

 

Section 8.01                            Right
to Convene Meetings

 

(a)                                  Convening of Meeting:  The Subscription Receipt Agent may at
any time and from time to time convene a meeting of the Subscription
Receiptholders, and will do so on receipt of a Written Request of the
Corporation or a Subscription Receiptholders’ Request and on being funded and
indemnified to its reasonable satisfaction by the Corporation or by one or more
of the Subscription Receiptholders signing such Subscription Receiptholders’
Request against the costs which it may incur in connection with calling
and holding such meeting.

 

(b)                                 Failure to Convene:  If the Subscription Receipt Agent fails,
within ten Business Days after receipt of such written request of the
Corporation or Subscription Receiptholders’ Request, funding and
indemnification, to give notice convening a meeting, the Corporation or any of
such Subscription Receiptholders, as the case may be, may convene
such meeting.

 

(c)                                  Place of Meeting:  Every such meeting will be held in Toronto,
Ontario, or such other place as is approved or determined by the Subscription
Receipt Agent and the Corporation.

 

Section 8.02                            Notice

 

(a)                                  Notice: 
At least 21 Business Days’ notice of any meeting must be given to the
Subscription Receiptholders, to the Subscription Receipt Agent (unless the
meeting has been called by it) and to the Corporation (unless the meeting has
been called by it).

 

(b)                                 Contents:  The notice of the meeting must state the time
when and the place where the meeting is to be held and must state briefly the
general nature of the business to be transacted thereat, but it will not be
necessary for the notice to set out the terms of any resolution to be proposed
or any of the provisions of this article.

 

Section 8.03                            Chairman

 

Some person (who need not be a Subscription
Receiptholder) designated in writing by the Subscription Receipt Agent, or by
the Corporation in the case of a meeting called by the Corporation, will be
chairman of the meeting or, if no person is so designated or the person so
designated is not present within 15 minutes after the time fixed for the
holding of the meeting, the Subscription Receiptholders present in person or by
proxy may choose some person present to be chairman.

 

31

 

Section 8.04                            Quorum

 

(a)                                  Quorum: 
Subject to the provisions of section 8.12 hereof, at any meeting of
Subscription Receiptholders a quorum will consist of Subscription
Receiptholders, present in person or represented by proxy at the commencement
of the meeting, who hold in the aggregate not less than 25% of the total number
of Subscription Receipts then outstanding.

 

(b)                                 No Quorum:  If a quorum of Subscription Receiptholders is
not present within 30 minutes after the time appointed for holding a meeting,
the meeting, if convened by Subscription Receiptholders or on a Subscription
Receiptholders’ Request, will be dissolved, but, subject to section 8.12
hereof, in any other case will stand adjourned to such day, being not less than
five Business Days or more than ten Business Days later, and to such place and
time as is appointed by the Chairman.

 

(c)                                  Adjourned Meeting:  At the adjourned meeting the Subscription
Receiptholders present in person or by proxy will form a quorum and may transact
any business for which the meeting was originally convened notwithstanding the
number of Subscription Receipts that they hold.

 

Section 8.05                            Power
to Adjourn

 

The chairman of a meeting at which a quorum
of the Subscription Receiptholders is present may, with the consent of the
meeting, adjourn the meeting, and no notice of such adjournment need be given
except as the meeting prescribes.

 

Section 8.06                            Show
of Hands

 

Every question submitted to a meeting,
other than an Extraordinary Resolution, will be decided in the first place by a
majority of the votes given on a show of hands and, unless a poll is duly
demanded as herein provided, a declaration by the chairman that a resolution
has been carried or carried unanimously or by a particular majority or lost or
not carried by a particular majority will be conclusive evidence of the fact.

 

Section 8.07                            Poll

 

(a)                                  Extraordinary Resolution:  On every Extraordinary Resolution, and on
every other question submitted to a meeting on which a poll is directed by the
chairman or requested by one or more Subscription Receiptholders acting in
person or by proxy and holding in the aggregate not less than 10% of the total
number of Subscription Receipts then outstanding, a poll will be taken in such
manner as the chairman directs.

 

(b)                                 Other: 
Questions other than those required to be determined by Extraordinary
Resolution will be decided by a majority of the votes cast on the poll.

 

Section 8.08                            Voting

 

On a show of hands each person present and
entitled to vote, whether as a Subscription Receiptholder or as proxy for one
or more absent Subscription Receiptholders, or both, will have one vote, and on
a poll each Subscription Receiptholder present in person or represented by a
proxy duly appointed by instrument

 

32

 

in writing will be entitled to one vote in
respect of each Subscription Receipt held by such holder. A proxy need not be a
Subscription Receiptholder.

 

Section 8.09                            Regulations

 

(a)                                  Ability to Make:  The Subscription Receipt Agent, or the
Corporation with the approval of the Subscription Receipt Agent, may from
time to time make or vary such regulations as it thinks fit:

 

(i)                                     for the form of instrument appointing a proxy, the manner in
which it must be executed and verification of the authority of a person who
executes it on behalf of a Subscription Receiptholder;

 

(ii)                                  governing the places at which and the times by which voting
certificates or instruments appointing proxies must be deposited;

 

(iii)                               generally for the calling of meetings of Subscription Receiptholders
and the conduct of business thereof; and

 

(iv)                              for the deposit of instruments appointing proxies at some approved
place or places other than the place at which the meeting is to be held and
enabling particulars of such instruments appointing proxies to be sent by mail,
telecopier or other means of prepaid, transmitted, recorded communication
before the meeting to the Corporation or to the Subscription Receipt Agent at
the place where the meeting is to be held and for voting pursuant to
instruments appointing proxies so deposited as though the instruments
themselves were produced at the meeting.

 

Any regulations so made will be binding and effective and the votes
given in accordance therewith will be valid and will be counted.

 

(b)                                 Recognition:  Except as such regulations provide, the only
persons who will be recognized at a meeting as the holders of any Subscription
Receipts, or as entitled to vote or, subject to section 8.10 hereof, to be
present at the meeting in respect thereof, will be the registered holders of
such Subscription Receipts or persons holding proxies on their behalf.

 

Section 8.10                            The
Corporation and Subscription Receipt Agent may be Represented

 

The Corporation and the Subscription
Receipt Agent by their respective employees, officers or directors, and the
counsel of the Corporation and the Subscription Receipt Agent, may attend
any meeting of Subscription Receiptholders, but will have no vote as such.

 

Section 8.11                            Powers
Exercisable by Extraordinary Resolution

 

In addition to all other powers conferred
on them by the other provisions of this Indenture or by law, the Subscription
Receiptholders at a meeting will have the power, exercisable from time to time
by Extraordinary Resolution:

 

(a)                                  to assent to or sanction any amendment, modification, abrogation,
alteration, compromise or arrangement of any right of the Subscription
Receiptholders or,

 

33

 

with the reasonable consent of the Subscription
Receipt Agent, of the Subscription Receipt Agent in its capacity as trustee
hereunder or on behalf of the Subscription Receiptholders against the
Corporation, whether such right arises under this Indenture or otherwise, which
shall be agreed to by the Corporation, and to authorize the Subscription
Receipt Agent to concur in and execute any indenture supplemental hereto in
connection therewith;

 

(b)                                 to amend, alter or repeal any Extraordinary Resolution previously
passed;

 

(c)                                  subject to arrangements as to financing and indemnity satisfactory
to the Subscription Receipt Agent, to direct or authorize the Subscription
Receipt Agent to enforce any obligation of the Corporation under this Indenture
or to enforce any right of the Subscription Receiptholders in any manner
specified in the Extraordinary Resolution;

 

(d)                                 to direct or authorize the Subscription Receipt Agent to refrain
from enforcing any obligation or right referred to in clause 8.11(c) hereof;

 

(e)                                  to waive and direct the Subscription Receipt Agent to waive any
default by the Corporation in complying with any provision of this Indenture,
either unconditionally or on any condition specified in the Extraordinary
Resolution;

 

(f)                                    to appoint a committee with power and authority to exercise, and to
direct the Subscription Receipt Agent to exercise, on behalf of the
Subscription Receiptholders, such of the powers of the Subscription
Receiptholders as are exercisable by Extraordinary Resolution;

 

(g)                                 to restrain any Subscription Receiptholder from taking or
instituting any suit, action or proceeding against the Corporation for the enforcement
of any obligation of the Corporation under this Indenture or to enforce any
right of the Subscription Receiptholders;

 

(h)                                 to direct any Subscription Receiptholder who, as such, has brought
any suit, action or proceeding, to stay or discontinue or otherwise deal
therewith on payment of the costs, charges and expenses reasonably and properly
incurred by him in connection therewith;

 

(i)                                     to assent to any change in or omission from the provisions contained
in the Subscription Receipt Certificates and this Indenture or any ancillary or
supplemental instrument which may be agreed to by the Corporation, and to
authorize the Subscription Receiptholders to concur in and execute any
ancillary or supplemental indenture embodying the change or omission;

 

(j)                                     to assent to any compromise or arrangement with any creditor or
creditors or any class or classes of creditors, whether secured or
otherwise, and with holders of any shares or other securities of the
Corporation; and

 

(k)                                  from time to time and at any time to remove the Subscription Receipt
Agent and appoint a successor, agent or trustee.

 

34

 

Section 8.12                            Meaning
of “Extraordinary Resolution”

 

(a)                                  Meaning: 
The expression “Extraordinary Resolution” when used in this Indenture
means, subject to the provisions of this section and of sections 8.15 and
8.16 hereof, a motion proposed at a meeting of Subscription Receiptholders duly
convened for that purpose and held in accordance with the provisions of this article eight
at which there are present in person or by proxy at least 25% of the
Subscription Receiptholders holding in the aggregate more than 25% of the total
number of Subscription Receipts then outstanding and passed by the affirmative
votes of Subscription Receiptholders who hold in the aggregate not less than 66
2/3% of the total number of Subscription Receipts represented at the meeting
and voted on the motion.

 

(b)                                 Quorum: 
If, at a meeting called for the purpose of passing an Extraordinary
Resolution, the quorum required by subsection 8.12(a) hereof is not
present within 30 minutes after the time appointed for the meeting, the
meeting, if convened by Subscription Receiptholders or on a Subscription
Receiptholders’ Request, will be dissolved, but in any other case will stand
adjourned to such day, being not less than five Business Days or more than ten
Business Days later, and to such place and time, as is appointed by the
chairman.

 

(c)                                  Notice: 
Not less than three Business Days’ notice must be given to the
Subscription Receiptholders of the time and place of such adjourned meeting.

 

(d)                                 Form of Notice:  The notice must state that at the adjourned
meeting the Subscription Receiptholders present in person or by proxy will form a
quorum but it will not be necessary to set forth the purposes for which the
meeting was originally called or any other particulars.

 

(e)                                  Quorum at Adjourned Meeting:  At the adjourned meeting the Subscription
Receiptholders present in person or by proxy will form a quorum and may transact
any business for which the meeting was originally convened, and a motion
proposed at such adjourned meeting and passed by the requisite vote as provided
in subsection 8.12(a) hereof will be an Extraordinary Resolution
within the meaning of this Indenture notwithstanding that Subscription
Receiptholders holding in the aggregate 25% of the total number of Subscription
Receipts outstanding may not be present.

 

(f)                                    Poll: 
Votes on an Extraordinary Resolution must always be given on a poll and
no demand for a poll on an Extraordinary Resolution will be necessary.

 

Section 8.13                            Powers
Cumulative

 

Any one or more of the powers, and any
combination of the powers, in this Indenture stated to be exercisable by the
Subscription Receiptholders by Extraordinary Resolution or otherwise, may be
exercised from time to time, and the exercise of any one or more of such powers
or any combination of such powers from time to time will not prevent the
Subscription Receiptholders from exercising such power or powers or combination
of powers thereafter from time to time.

 

35

 

Section 8.14                            Minutes

 

Minutes of all resolutions passed and
proceedings taken at every meeting of the Subscription Receiptholders will be
made and duly entered in books from time to time provided for such purpose by
the Subscription Receipt Agent at the expense of the Corporation, and any such
minutes, if signed by the chairman of the meeting at which such resolutions
were passed or such proceedings were taken, will be prima facie evidence of the matters therein stated, and,
until the contrary is proved, every such meeting in respect of the proceedings
of which minutes have been so made, entered and signed will be deemed to have
been duly convened and held, and all resolutions passed and proceedings taken
thereat to have been duly passed and taken.

 

Section 8.15                            Instruments
in Writing

 

Any action that may be taken and any
power that may be exercised by Subscription Receiptholders at a meeting
held as provided in this Article Eight 
may also be taken and exercised by Subscription Receiptholders who
hold in the aggregate not less than 50% of the total number of Subscription
Receipts at the time outstanding or in the case of an Extraordinary Resolution,
Subscription Receiptholders who hold in the aggregate not less than
66 2/3% of the total number of Subscription Receipts at the time
outstanding, by their signing, each in person or by attorney duly appointed in
writing, an instrument in writing in one or more counterparts, and the
expression “Extraordinary Resolution” when used in this Indenture includes a
resolution embodied in an instrument so signed.

 

Section 8.16                            Binding
Effect of Resolutions

 

Every resolution and every Extraordinary
Resolution passed in accordance with the provisions of this Article Eight
at a meeting of Subscription Receiptholders will be binding on all Subscription
Receiptholders, whether present at or absent from the meeting and whether
voting for or against the resolution or abstaining, and every instrument in
writing signed by Subscription Receiptholders in accordance with section 8.15
hereof will be binding on all Subscription Receiptholders, whether signatories
thereto or not, and every Subscription Receiptholder and the Subscription
Receipt Agent (subject to the provisions for its indemnity herein contained)
will be bound to give effect accordingly to every such resolution and
instrument in writing.

 

Section 8.17                            Holdings
by the Corporation and Subsidiaries Disregarded

 

In determining whether Subscription
Receiptholders holding the required total number of Subscription Receipts are
present in person or by proxy for the purpose of constituting a quorum, or have
voted or consented to a resolution, Extraordinary Resolution, consent, waiver,
Subscription Receiptholders’ Request or other action under this Indenture, a
Subscription Receipt held by the Corporation or by a Subsidiary of the
Corporation will be deemed to be not outstanding. The Corporation shall provide
the Subscription Receipt Agent with a certificate of the Corporation providing
details of any Subscription Receipts held by the Corporation or by a Subsidiary
of the Corporation upon the written request of the Subscription Receipt Agent.

 

ARTICLE NINE

SUPPLEMENTAL INDENTURES AND SUCCESSOR CORPORATIONS

 

Section 9.01                            Provision
for Supplemental Indentures for Certain Purposes

 

From time to time the Corporation (when
authorized by the directors) and the Subscription Receipt Agent may, subject to
the provisions hereof, and will when so directed hereby, execute and deliver by
their

 

36

 

proper officers indentures or instruments
supplemental hereto, which thereafter will form part hereof, for any
or all of the following purposes:

 

(a)                                  increasing the number of Subscription Receipts authorized for issue
hereunder and the corresponding number of Underlying Securities to which
Subscription Receiptholders are entitled;

 

(b)                                 setting forth any adjustments resulting from the application of the
provisions of section 4.06 hereof;

 

(c)                                  adding hereto such additional covenants and enforcement provisions
as in the opinion of counsel are necessary or advisable, and are not in the
opinion of the Subscription Receipt Agent prejudicial to the interest of the
Subscription Receiptholders;

 

(d)                                 giving effect to any Extraordinary Resolution passed as provided in Article Eight
hereof;

 

(e)                                  making such provisions not inconsistent with this Indenture as are
necessary or desirable with respect to matters or questions arising hereunder
or for the purpose of obtaining a listing or quotation of the Common Shares on
a stock exchange or over-the-counter market, and are not in the opinion of
counsel prejudicial to the interests of the Subscription Receiptholders;

 

(f)                                    adding to, deleting or altering the provisions hereof in respect of
the transfer of Subscription Receipts or the conversion of Subscription Receipt
Certificates, and making any modification in the form of the Subscription
Receipt Certificates that does not affect the substance thereof;

 

(g)                                 modifying any provision of this Indenture (including, without
limitation, making any modification which increases the number or amount of
Common Shares and Warrants issuable pursuant to the Subscription Receipts) or
relieving the Corporation from any obligation, condition or restriction herein
contained, except that no such modification or relief will be or become
operative or effective if in the opinion of counsel it would impair any right
of the Subscription Receiptholders or of the Subscription Receipt Agent, and
the Subscription Receipt Agent may in its uncontrolled discretion decline
to enter into any such supplemental indenture which in its opinion will not
afford adequate protection to the Subscription Receipt Agent when it becomes
operative; and

 

(h)                                 for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any ambiguity,
defective or inconsistent provision, error or omission herein, if in the
opinion of counsel, the rights of the Subscription Receipt Agent and of the
Subscription Receiptholders are not prejudiced thereby.

 

Section 9.02                            Successor
Corporations

 

In the case of the consolidation,
amalgamation, arrangement, merger, other form of business combination or
transfer of the undertaking or assets of the Corporation as an entirety, or
substantially as an entirety, to another corporation or other entity, the
successor corporation or other entity resulting from such

 

37

 

consolidation, amalgamation, arrangement,
merger, other form of business combination or transfer (if not the
Corporation) will be bound by the provisions hereof and for the due and
punctual performance and observance of each and every covenant and obligation contained
in this Indenture to be performed by the Corporation and will execute and
deliver to the Subscription Receipt Agent a supplemental indenture and such
other instruments as are satisfactory in form to the Subscription Receipt
Agent and in the opinion of counsel are necessary or advisable to evidence the
express assumption by the successor corporation of such obligations.

 

ARTICLE TEN

CONCERNING SUBSCRIPTION RECEIPT AGENT

 

Section 10.01                     Trust
Indenture Legislation

 

If and to the extent that any provision of
this Indenture limits, qualifies or conflicts with a mandatory requirement of
Applicable Legislation, the mandatory requirement will prevail. The Corporation
and the Subscription Receipt Agent each will at all times in relation to this
Indenture and any action to be taken hereunder observe and comply with and be
entitled to the benefits of Applicable Legislation.

 

Section 10.02                     Rights and
Duties of Subscription Receipt Agent

 

(a)                                  Duty of Subscription Receipt Agent:  In the exercise of the rights and duties
prescribed or conferred by the terms of this Indenture, the Subscription
Receipt Agent will act honestly and in good faith and will exercise that degree
of care, diligence and skill that a reasonably prudent subscription receipt
agent would exercise in comparable circumstances. The Subscription Receipt
Agent shall not be bound to give any notice or do or take any act, action or
proceeding by virtue of the powers conferred on it hereby unless and until it
shall have been required so to do under the terms hereof; nor shall the
Subscription Receipt Agent be required to take notice of any default hereunder,
unless and until notified in writing of such default, which notice shall
distinctly specify the default desired to be brought to the attention of the
Subscription Receipt Agent and, in the absence of any such notice, the
Subscription Receipt Agent may for all purposes of this Indenture
conclusively assume that no default has been made in the observance or
performance of any of the representations, warranties, covenants, agreements or
conditions contained therein. Any such notice shall in no way limit any
discretion herein given to the Subscription Receipt Agent to determine whether
or not the Subscription Receipt Agent shall take action with respect to any
default.

 

(b)                                 No Relief From Liability:  No provision of this Indenture will be
construed to relieve the Subscription Receipt Agent from liability for its own
negligent act, negligent failure to act, wilful misconduct or bad faith.

 

(c)                                  Actions: 
The obligation of the Subscription Receipt Agent to commence or continue
any act, action or proceeding in connection herewith, including without
limitation, for the purpose of enforcing any right of the Subscription Receipt
Agent or the Subscription Receiptholders hereunder is on the condition that the
Subscription Receipt Agent shall have received a Subscription Receiptholders’
Request specifying the act, action or proceeding which the Subscription Receipt
Agent is requested to take and, when required by notice to the Subscription
Receiptholders by the Subscription Receipt Agent, the Subscription Receipt

 

38

 

Agent is furnished by one or more Subscription
Receiptholders with sufficient funds to commence or continue such act, action
or proceeding and an indemnity reasonably satisfactory to the Subscription
Receipt Agent to protect and hold it harmless against the costs, charges,
expenses and liabilities to be incurred thereby and any loss and damage it may suffer
by reason thereof.

 

(d)                                 Funding: 
No provision of this Indenture will require the Subscription Receipt
Agent to expend or risk its own funds or otherwise incur financial liability in
the performance of any of its duties or in the exercise of any of its rights or
powers unless it is so indemnified.

 

(e)                                  Deposit of Subscription Receipts:  The Subscription Receipt Agent may, before
commencing or at any time during the continuance of any such act, action or
proceeding, require the Subscription Receiptholders at whose instance it is
acting to deposit with the Subscription Receipt Agent the Subscription Receipt
Certificates held by them, for which certificates the Subscription Receipt
Agent will issue receipts.

 

(f)                                    Restriction:  Every provision of this Indenture that
relieves the Subscription Receipt Agent of liability or entitles it to rely on
any evidence submitted to it is subject to the provisions of Applicable
Legislation, of this section and of section 10.03 hereof.

 

Section 10.03                     Evidence,
Experts and Advisers

 

(a)                                  Evidence:  In addition to the reports, certificates,
opinions and other evidence required by this Indenture, the Corporation will
furnish to the Subscription Receipt Agent such additional evidence of
compliance with any provision hereof, and in such form, as is prescribed by
Applicable Legislation or as the Subscription Receipt Agent reasonably requires
by written notice to the Corporation.

 

(b)                                 Reliance by Subscription Receipt Agent:  In the exercise of any right or duty
hereunder the Subscription Receipt Agent, if it is acting in good faith, may act
and rely, as to the truth of any statement or the accuracy of any opinion
expressed therein, on any statutory declaration, opinion, report, certificate
or other evidence furnished to the Subscription Receipt Agent pursuant to the
provisions hereof or of Applicable Legislation or pursuant to a request of the
Subscription Receipt Agent, if such evidence complies with Applicable
Legislation and the Subscription Receipt Agent examines such evidence and determines
that it complies with the applicable requirements of this Indenture.

 

(c)                                  Statutory Declaration:  Whenever Applicable Legislation requires that
evidence referred to in subsection 10.03(a) hereof be in the form of
a statutory declaration, the Subscription Receipt Agent may accept such
statutory declaration in lieu of a Certificate of the Corporation required by
any provision hereof. Any such statutory declaration may be made by any
one or more of the Chairman, President, Chief Financial Officer or Secretary of
the Corporation or by any other officer(s) or director(s) of the Corporation to
whom such authority is delegated by the directors from time to time. In
addition, the Subscription Receipt Agent may act and rely and shall be
protected in acting and relying upon any resolution,

 

39

 

certificate, direction, instruction, statement,
instrument, opinion, report, notice, request, consent, order, letter, telegram,
cablegram or other paper or document believed by it to be genuine and to have
been signed, sent or presented by or on behalf of the proper party or parties.

 

(d)                                 Proof of Execution:  Proof of the execution of any document or
instrument in writing, including a Subscription Receiptholders’ Request, by a Subscription
Receiptholder may be made by the certificate of a notary public, or other
officer with similar powers, that the person signing such instrument
acknowledged to him the execution thereof, or by an affidavit of a witness to
such execution, or in any other manner that the Subscription Receipt Agent
considers adequate.

 

(e)                                  Experts: 
The Subscription Receipt Agent may employ or retain such counsel,
accountants, appraisers, or other experts or advisers as it reasonably requires
for the purpose of determining and discharging its rights and duties hereunder
and may pay the reasonable remuneration and disbursements for all services
so performed by any of them, without taxation of costs of any counsel, and will
not be responsible for any misconduct or negligence on the part of any of
them who has been selected with due care by the Subscription Receipt Agent. The
Subscription Receipt Agent may act and rely and shall be protected in
acting or not acting and relying in good faith on the opinion or advice of or
information obtained from any counsel, accountant or other expert or advisor,
whether retained or employed by the Corporation or by the Subscription Receipt
Agent, in relation to any matter arising in the administration of the duties
and obligations hereof.

 

Section 10.04                     Documents,
Money, Etc. held by Subscription Receipt Agent

 

(a)                                  Safekeeping:  Any security, document of title or other
instrument that may at any time be held by the Subscription Receipt Agent
subject to the provisions of this indenture hereof may be placed in the
deposit vaults of the Subscription Receipt Agent or of any Canadian chartered
bank or deposited for safekeeping with any such bank.

 

(b)                                 Holding of Funds:  Unless herein otherwise expressly provided,
any money held by the Subscription Receipt Agent pending the application or
withdrawal thereof under any provision of this Indenture shall be held in a
segregated account of any major Schedule I Canadian chartered bank earning
the prescribed rate of interest then in effect.

 

(c)                                  Interest:  Except in the circumstances described in section 6.03
hereof, all interest or other income received by the Subscription Receipt Agent
in respect of such deposits and investments referred to in subsection 10.04(b) will
belong to the Corporation.

 

Section 10.05                     Action by
Subscription Receipt Agent to Protect Interests

 

The Subscription Receipt Agent will have
power to institute and to maintain such actions and proceedings as it considers
necessary or expedient to protect or enforce its interests and the interests of
the Subscription Receiptholders.

 

40

 

Section 10.06                     Subscription
Receipt Agent not Required to Give Security

 

The Subscription Receipt Agent will not be
required to give any bond or security in respect of the execution of the duties
and obligations and powers of this Indenture.

 

Section 10.07                     Protection
of Subscription Receipt Agent

 

(a)                                  Protection:  By way of supplement to the provisions of any
law for the time being relating to agents, it is expressly declared and agreed
that:

 

(i)                                   the Subscription Receipt Agent will not be liable for or by reason
of, or required to substantiate, any statement of fact, representation or
recital in this Indenture or in the Subscription Receipt Certificates (except
the representation contained in section 10.09 hereof or in the certificate
of the Subscription Receipt Agent on the Subscription Receipt Certificates or
other representation of the Subscription Receipt Agent made herein or therein),
but all such statements or recitals are and will be deemed to be made by the
Corporation;

 

(ii)                                nothing herein contained will impose on the Subscription Receipt
Agent any obligation to see to, or to require evidence of, the registration or
filing (or renewal thereof) of this Indenture or any instrument ancillary or
supplemental hereto;

 

(iii)                             the Subscription Receipt Agent will not be bound to give notice to
any person of the execution hereof;

 

(iv)                            the Subscription Receipt Agent will not incur any liability or
responsibility whatever or be in any way responsible for the consequence of any
breach by the Corporation of any obligation or warranty herein contained or of
any act of any director, officer, employee or agent of the Corporation;

 

(v)                               the Subscription Receipt Agent, in its personal or any other
capacity, may buy, lend upon and deal in securities of the Corporation and
in the Subscription Receipts and generally may contract and enter into
financial transactions with the Corporation or any related corporation without
being liable to account for any profit made thereby;

 

(vi)                            the Subscription Receipt Agent shall incur no liability with respect
to the delivery or non-delivery of any certificate or certificates whether
delivered by hand, mail or any other means provided that they are sent in
accordance with the provisions hereof;

 

(vii)                         if the Subscription Receipt Agent delivers any cheque as required
hereunder, the Subscription Receipt Agent shall have no further obligation or
liability for the amount represented thereby, unless any such cheque is not
honoured on presentation, provided that in the event of the non-receipt of such
cheque by the payee, or the loss or destruction thereof, the Subscription
Receipt Agent, upon being furnished with reasonable evidence of such non-receipt,
loss or destruction and, if

 

41

 

required by the Subscription Receipt Agent, an
indemnity reasonably satisfactory to it, shall issue to such payee a
replacement cheque for the amount of such cheque; and

 

(viii)                      the Subscription Receipt Agent will disburse funds in accordance
with the provisions hereof only to the extent that funds have been deposited
with it.

 

(b)                                 Indemnity:  In addition to and without limiting any
protection of the Subscription Receipt Agent hereunder or otherwise by law, the
Corporation agrees to indemnify the Subscription Receipt Agent, its agents,
employees, directors and officers (each an “Indemnified Person”), and save each
Indemnified Person harmless from all liabilities, suits, damages, costs,
expenses and actions which may be brought against or suffered by it
arising out of or connected with the performance by the Subscription Receipt
Agent of its duties hereunder, except to the extent that such liabilities,
suits, damages, costs and actions are attributable to the negligence, wilful
misconduct or bad faith of the Subscription Receipt Agent or an Indemnified
Person. Notwithstanding any other provision hereof, this indemnity shall
survive any removal or resignation of the Subscription Receipt Agent, discharge
of this Indenture and termination of any duties and obligations hereunder.

 

Section 10.08                     Replacement
of Subscription Receipt Agent

 

(a)                                  Resignation:  The Subscription Receipt Agent may resign
and be discharged from all further duties and liabilities hereunder, except as
provided in this section, by giving to the Corporation and the Subscription
Receiptholders not less than 60 Business Days notice in writing or, if a new
Subscription Receipt Agent has been appointed, such shorter notice as the
Corporation accepts as sufficient, provided that such resignation and discharge
shall be subject to the appointment of a successor thereto in accordance with
the provisions hereof.

 

(b)                                 Removal: 
The Subscription Receiptholders by Extraordinary Resolution may at
any time remove the Subscription Receipt Agent and appoint a new Subscription
Receipt Agent.

 

(c)                                  Appointment of New Subscription Receipt Agent:  If the Subscription Receipt
Agent so resigns or is so removed or is dissolved, becomes bankrupt, goes into
liquidation or otherwise becomes incapable of acting hereunder, the Corporation
will forthwith appoint a new Subscription Receipt Agent, unless a new
Subscription Receipt Agent has already been appointed by the Subscription
Receiptholders.

 

(d)                                 Failure to Appoint:  Failing such appointment by the Corporation,
the retiring Subscription Receipt Agent or any Subscription Receiptholder may apply
at the expense of the Corporation to the Ontario Superior Court of Justice, on
such notice as the Court directs, for the appointment of a new Subscription
Receipt Agent.

 

(e)                                  New Subscription Receipt Agent:  Any new Subscription Receipt Agent appointed
under this section must be a corporation authorized to carry on the

 

42

 

business of a transfer agent or trust company in the
Province of Ontario and, if required by the Applicable Legislation of any other
province, in such other province. On any such appointment, the new Subscription
Receipt Agent will be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as Subscription
Receipt Agent without any further assurance, conveyance, act or deed, but there
will be immediately executed, at the expense of the Corporation, all such
conveyances or other instruments as, in the opinion of counsel, are necessary
or advisable for the purpose of assuring the transfer of such powers, rights,
duties and responsibilities to the new Subscription Receipt Agent. Any new
Subscription Receipt Agent so appointed by the Corporation or by the Court will
be subject to removal as aforesaid by the Subscription Receiptholders and by
the Corporation.

 

(f)                                    Notice of New Subscription Receipt Agent:  On the appointment of a new Subscription Receipt
Agent, the Corporation will promptly give notice thereof to the Subscription
Receiptholders in accordance with subsection 11.02(a) hereof.

 

(g)                                 Successor Subscription Receipt Agent:  A corporation into or with which the
Subscription Receipt Agent is merged or consolidated or amalgamated, or a
corporation succeeding to the business of the Subscription Receipt Agent, will
be the successor to the Subscription Receipt Agent hereunder without any
further act on its part or on the part of any party hereto if such
corporation would be eligible for appointment as a new Subscription Receipt
Agent under subsection 10.08(e) hereof.

 

(h)                                 Certificates:  A Subscription Receipt Certificate certified
but not delivered by a predecessor Subscription Receipt Agent may be
delivered by the new or successor Subscription Receipt Agent in the name of the
predecessor Subscription Receipt Agent or successor Subscription Receipt Agent.

 

Section 10.09                     Conflict
of Interest

 

The Subscription Receipt Agent represents
to the Corporation that, at the time of the execution and delivery hereof, no
material conflict of interest exists between its role as Subscription Receipt
Agent hereunder and its role in any other capacity and if a material conflict
of interest arises hereafter it will, within 30 days after ascertaining that it
has such material conflict of interest, either eliminate the conflict of
interest or resign its duties and obligations hereunder.

 

Section 10.10                     Acceptance
of Duties and Obligations

 

The Subscription Receipt Agent hereby
accepts the duties and obligations in this Indenture declared and provided for
and agrees to perform them on the terms and conditions herein set forth.
The Subscription Receipt Agent accepts the duties and responsibilities under
this indenture solely as custodian, bailee and agent. No trust is intended to
be or will be created hereby and the Subscription Receipt Agent shall owe no
duties hereunder as a trustee.

 

43

 

ARTICLE ELEVEN

GENERAL

 

Section 11.01                     Notice to
the Corporation and Subscription Receipt Agent

 

(a)                                  Corporation:  Unless herein otherwise expressly provided, a
notice to be given hereunder to the Corporation or the Subscription Receipt
Agent will be validly given if delivered or if sent by registered letter,
postage prepaid, or if sent by facsimile transmission (if receipt of such
transmission is confirmed):

 

(i)                                     if to the Corporation:

 

U.S. Gold Corporation

99 George Street

3rd Floor

Toronto, Ontario

M5A 2N4

 

Attention:  Robert R. McEwen

 

U.S. Gold Corporation

Suite 100

2201 Kipling Street

Lakewood, Colorado

80215-1545

 

Attention: William Pass

 

Facsimile: (303) 238-1724

 

Facsimile:  (647) 258-0408

 

with a copy to (with such delivery or sending not to be a delivery or
sending to the Corporation for purposes of this Indenture):

 

Fraser Milner Casgrain LLP

Suite 3900

100 King Street West

Toronto, Ontario

M5X 1B2

 

Attention:  Michael Melanson

 

Facsimile:  (416) 863-4592

 

and to (with such delivery or sending not to be a delivery or sending
to the Corporation for purposes of this Indenture):

 

Dufford & Brown P.C.

1700 Broadway, Suite 2100

Denver, Colorado

80290-2101

 

44

 

Attention: Dave Babiarz

 

Facsimile: (303) 832-3804

 

(ii)                                  if to the Agent:

 

GMP Securities L.P.

145 King Street West

Suite 1100

Toronto, Ontario

M5H 1J8

 

Attention:  Mark Wellings

 

Facsimile:  (416) 943-6160

 

with a copy to:

 

Cassels Brock & Blackwell LLP

2100 Scotia Plaza

100 King Street West

Toronto, Ontario

M5H 3C2

 

45

 

Attention:  Chad Accursi

 

Facsimile:  (416) 642-7131

 

and to:

 

Dorsey & Whitney LLP

161 Bay Street

Suite 4310

Toronto, Ontario

M5J 2S1

 

Attention: Gil Cornblum

 

Facsimile:  (416) 367-7371

 

(iii)                               if to the Subscription Receipt Agent:

 

Equity Transfer Services Inc.

Suite 420

120 Adelaide Street West

Toronto, Ontario

M5H 4C3

 

Attention:                                         President

 

Facsimile:                                            (416) 361-0470

 

and any such notice delivered or sent in accordance with the foregoing
will be deemed to have been received on the date of delivery or facsimile
transmission or, if mailed, on the second Business Day following the day of the
mailing of the notice. The original of any document sent by facsimile
transmission to the Subscription Receipt Agent shall be subsequently mailed to
the Subscription Receipt Agent.

 

(b)                                 Change of Address:  The Corporation or the Subscription Receipt
Agent, as the case may be, may from time to time notify the other in
the manner provided in subsection 11.01(a) hereof of a change of
address which, from the effective date of such notice and until changed by like
notice, will be the address of the Corporation or the Subscription Receipt
Agent, as the case may be, for all purposes of this Indenture.

 

(c)                                  Postal Interruption:  If, by reason of a strike, lockout or other
work stoppage, actual or threatened, involving Canadian postal employees, a
notice to be given to the Subscription Receipt Agent or to the Corporation
hereunder could reasonably be considered unlikely to reach or likely to be delayed
in reaching its destination, the notice will be valid and effective only if it
is delivered to an officer of the party to which it is addressed. Any notice
delivered in accordance with the foregoing will be deemed to have been received
on the date of delivery to such officer.

 

(d)                                 Governing Law:  This Subscription Receipt Indenture shall be
governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and the parties
hereto irrevocably attorn to the jurisdiction of the courts of the Province of
Ontario.

 

46

 

Section 11.02                     Notice to
Subscription Receiptholders

 

(a)                                  Notice: 
Unless herein otherwise expressly provided, a notice to be given
hereunder to Subscription Receiptholders will be deemed to be validly given if
the notice is sent by ordinary surface or air mail, postage prepaid, addressed
to the Subscription Receiptholders or delivered (or so mailed to certain
Subscription Receiptholders and so delivered to the other Subscription
Receiptholders) at their respective addresses appearing on any of the registers
of holders described in section 3.01 hereof, provided, however, that if,
by reason of a strike, lockout or other work stoppage, actual or threatened,
involving Canadian postal employees, the notice could reasonably be considered
unlikely to reach or likely to be delayed in reaching its destination, the
notice will be valid and effective only if it is so delivered or is given by
publication twice in the Report on Business section in the national
edition of The Globe and Mail.

 

(b)                                 Date of Notice:  A notice so given by mail or so delivered
will be deemed to have been given on the fifth Business Day after it has been
mailed or on the day on which it has been delivered, as the case may be,
and a notice so given by publication will be deemed to have been given on the
day on which it has been published as required. In determining under any
provision hereof the date when notice of a meeting or other event must be
given, the date of giving notice will be included and the date of the meeting
or other event will be excluded. Accidental error or omission in giving notice
or accidental failure to mail notice to any Subscription Receiptholder will not
invalidate any action or proceeding founded thereon.

 

Section 11.03                     Satisfaction
and Discharge of Indenture

 

If all certificates representing Common
Shares and Warrants required to be issued in compliance with the provisions
hereof have been issued hereunder in accordance with such provisions, if all
payments required to be made in compliance with the provisions of this
Indenture have been made in accordance with such provisions and payment to the
Subscription Receipt Agent of the fees and other remuneration payable to the
Subscription Receipt Agent have been made, this Indenture will cease to be of
further effect and, on demand of and at the cost and expense of the Corporation
and on delivery to the Subscription Receipt Agent of a Certificate of the
Corporation stating that all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with and on payment to the
Subscription Receipt Agent of the fees and other remuneration payable to the
Subscription Receipt Agent, the Subscription Receipt Agent will execute proper
instruments acknowledging the satisfaction of and discharging this Indenture.

 

Section 11.04                     Sole
Benefit of Parties and Subscription Receiptholders

 

Nothing in this Indenture or the
Subscription Receipt Certificates, expressed or implied, will give or be
construed to give to any person other than the parties hereto and the
Subscription Receiptholders, as the case may be, any legal or equitable
right, remedy or claim under this Indenture or the Subscription Receipt Certificates,
or under any covenant or provision herein or therein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
the Subscription Receiptholders.

 

47

 

Section 11.05                     Discretion
of Directors

 

Any matter provided herein to be determined
by the directors will be determined by the directors in their sole discretion,
acting reasonably, and a determination so made will be conclusive.

 

Section 11.06                     Counterparts
and Formal Date

 

This Indenture may be executed in
several counterparts, each of which when so executed will be deemed to be an
original and such counterparts together will constitute one and the same
instrument and notwithstanding the date of their execution will be deemed to be
dated as of this indenture.

 

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

 

	
   

  	
  U.S. GOLD CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert R. McEwen

  
	
   

  	
   

  	
  Title:

  	
  Chairman & Chief Executive
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GMP SECURITIES L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark Wellings

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EQUITY TRANSFER SERVICES
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Barnowski

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
							

 

48

 

SCHEDULE A
TO THE SUBSCRIPTION RECEIPT INDENTURE DATED AS OF

FEBRUARY 22, 2006 BETWEEN U.S. GOLD CORPORATION,

GMP SECURITIES L.P. AND EQUITY TRANSFER SERVICES INC.

 

SUBSCRIPTION
RECEIPT CERTIFICATE

 

“UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE
DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (I) FEBRUARY 22,
2006, AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR
TERRITORY OF CANADA.”;

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (A) TO U.S. GOLD CORPORATION (“U.S. GOLD”), (B) OUTSIDE
THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER,
IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO U.S. GOLD
AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY
SATISFACTORY TO U.S. GOLD. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.”

 

	
  Certificate Number:

  	
   

  	
  Number of Subscription Receipts:

  

 

SUBSCRIPTION
RECEIPTS

 

convertible
for Common Shares and Warrants of

 

U.S. GOLD
CORPORATION

 

THIS IS TO CERTIFY THAT, for value received,
                                    
(the “holder”) is the registered holder of the number of Subscription Receipts
(“Subscription Receipts”) specified above of U.S. Gold Corporation (the “Corporation”)
and is thereby entitled, without payment of any additional consideration, to be
issued fully paid and non-assessable common shares of the Corporation (“Common
Shares”) and Warrants (as defined in the Subscription Receipt Indenture
hereinafter referred to) immediately prior to the Time of Expiry (as defined in
the Subscription Receipt Indenture) on the basis of one Common Share and
one-half of one Warrant for each one Subscription Receipt, or, if the Release
Conditions (as defined in the Subscription Receipt Indenture) have not been
satisfied prior to the Penalty Deadline (as defined in the Subscription Receipt
Indenture), the holder shall be entitled, upon the conversion of the
Subscription Receipts, to 1.1 Common Shares (in lieu of one Common Share) and
0.55 Warrants (in lieu of one-half of one Warrant) for each Subscription
Receipt, all subject to adjustment in accordance with the provisions of the
Subscription Receipt Indenture, and subject to the limitation referred to
below.

 

This Subscription Receipt Certificate represents
Subscription Receipts of the Corporation issued under the provisions of a
subscription receipt indenture (which indenture, together with all instruments
supplemental or ancillary thereto, is herein referred to as the “Subscription
Receipt

 

 

Indenture”) dated as of February 22,
2006 between the Corporation, GMP Securities L.P. and the Subscription Receipt
Agent. Reference is hereby made for particulars of the rights of the holders of
the Subscription Receipts, the Corporation and the Subscription Receipt Agent
in respect thereof and of the terms and conditions upon which the Subscription
Receipts are issued and held, all to the same effect as if the provisions of
the Subscription Receipt Indenture were herein set forth in full, to all of
which the holder, by acceptance hereof, assents. In the event of a conflict
between the provisions of this Subscription Receipt Certificate and the
Subscription  Receipt Indenture, the
terms of the Subscription Receipt Indenture shall govern. The Corporation will
furnish to the holder, on request, a copy of the Subscription Receipt
Indenture.

 

The Subscription Receipts represented by this
Subscription Receipt Certificate will be converted by the Subscription Receipt
Agent for and on behalf of the holder immediately prior to the Time of Expiry
and the holder will be deemed to have subscribed for the Common Shares and
Warrants issuable on the conversion of such Subscription Receipts without the
taking of any action or payment of any amount by the holder, including the
surrender of this Subscription Receipt Certificate, which will thereupon be
cancelled by the Subscription Receipt Agent.

 

Pursuant to the Subscription Receipt Indenture, the
Release Date is the date on which the Corporation and GMP Securities L.P.
deliver a notice to the Subscription Receipt Agent in the form required
under the Subscription Receipt Indenture, which notice will inform the
Subscription Receipt Agent of the satisfaction of the Release Conditions. The
Release Conditions will be satisfied upon the latest to occur of the following:
(i) the third Business Day after the date on which the Ontario Securities
Commission, as the principal regulator under National Policy 43-201 and the MRRS,
issues a decision document evidencing that each of the Securities Commissions
has issued a receipt for the Final Prospectus; (ii) the completion and
filing via SEDAR of a current technical report regarding the Tonkin Springs
gold project that complies with National Instrument 43-101 – Standards of
Disclosure for Mineral Projects of the Canadian Securities Administrators; (iii) the
Common Shares being listed for trading on the Toronto Stock Exchange; (iv) the
effectiveness of the Registration Statement; and (v) the delivery of a
10b-5 opinion, addressed to the Agent in a form satisfactory to the Agent,
acting reasonably, provided by United States counsel to the Corporation in
respect of the Registration Statement.

 

If any of the Release Conditions have not been
satisfied prior to the Initial Qualification Deadline, the Escrowed Funds shall
be returned by the Subscription Receipt Agent, on behalf of the Corporation, to
the holders of the Subscription Receipts in exchange for the delivery to the
Corporation for cancellation of 50% of the outstanding Subscription Receipts
held by each holder. The remaining 50% of the Subscription Receipts not
returned to the Corporation on the Initial Qualification Deadline shall remain
outstanding until the Expiry Date, all as more particularly set out in the
Subscription Receipt Indenture.

 

The holder of this
Subscription Receipt and any transferee hereof are cautioned that in the event
that the Subscription Receipts are deemed to be converted or are cancelled,
certificates representing the Common Shares and Warrants or cheque, as the case
may be, will be mailed or delivered to the latest address of record of the
registered holder or to the direction of the registered holder, and the
Corporation and the Subscription Receipt Agent are not bound to take notice of
any transfers or assignments unless the transferee is a duly registered holder
of the Subscription Receipt prior to such mailing or delivery.

 

On and after the date of any conversion of the
Subscription Receipts represented by this Subscription Receipt Certificate, the
holder will have no rights hereunder except to receive certificates
representing the Common Shares and the Warrants issued upon the conversion
thereof to such holder.

 

2

 

The Corporation will not be obligated after the
aggregation of the number of Common Shares and Warrants to be issued to a
holder of Subscription Receipts to issue any fraction of a Common Share or
Warrant on the conversion of Subscription Receipts. A holder of Subscription
Receipts shall not be entitled to receive a cash payment or any other
compensation in respect of any such fraction of a Common Share or Warrant.

 

No Common Shares or Warrants will be issued pursuant
to any conversion of any Subscription Receipt if the issue of such security
would constitute a violation of the securities laws of any applicable
jurisdiction.

 

The Subscription Receipt Indenture provides for
adjustments to the rights of the holders of Subscription Receipts on the
happening of certain stated events, including the subdivision or consolidation
of the outstanding Common Shares, certain distributions of Common Shares or of
securities convertible into or exchangeable for Common Shares or of other
securities or assets of the Corporation, certain offerings of rights, warrants
or options and certain capital reorganizations.

 

The Subscription Receipt Indenture contains provisions
making binding on all holders of Subscription Receipts outstanding thereunder
resolutions passed at meetings of such holders held in accordance with such
provisions and instruments in writing signed by holders of a specified majority
of all outstanding Subscription Receipts.

 

On presentation at the principal office of the
Subscription Receipt Agent in Toronto, Ontario, subject to the provisions of
the Subscription Receipt Indenture and on compliance with the reasonable
requirements of the Subscription Receipt Agent, one or more Subscription
Receipt Certificates may be exchanged at no cost to the holder for one or
more Subscription Receipt Certificates of different denominations representing
in the aggregate the same number of Subscription Receipts as the Subscription
Receipt Certificate or Subscription Receipt Certificates being exchanged.

 

The Subscription Receipts represented by this
Subscription Receipt Certificate may only be transferred, upon compliance
with the conditions prescribed in the Subscription Receipt Indenture, on the
register of transfers to be kept at the principal office of the Subscription
Receipt Agent in Toronto, Ontario, by the holder or the executors,
administrators or other legal representatives thereof or the attorney thereof
appointed by an instrument in writing in form and executed in a manner
satisfactory to the Subscription Receipt Agent and, upon compliance with such
requirements and such other reasonable requirements as the Subscription Receipt
Agent may prescribe, such transfer will be duly recorded on such register
of transfers by the Subscription Receipt Agent. Notwithstanding the foregoing,
the Corporation will be entitled, and may direct the Subscription Receipt
Agent, to refuse to record any transfer of any Subscription Receipt on such
register if such transfer would constitute a violation of the securities laws
of any jurisdiction.

 

The holding of this Subscription Receipt Certificate
will not constitute the holder a shareholder of the Corporation or entitle such
holder to any right or interest in respect thereof except as otherwise provided
in the Subscription Receipt Indenture.

 

This Subscription Receipt Certificate will not be
valid for any purpose until it has been certified by or on behalf of the
Subscription Receipt Agent for the time being under the Subscription Receipt
Indenture.

 

Time is of the essence hereof.

 

3

 

The Subscription Receipt Certificate will be construed
and enforced in accordance with the laws prevailing in the Province of Ontario
and the federal laws of Canada applicable therein and will be treated in all
respects as an Ontario contract.

 

IN WITNESS WHEREOF THE CORPORATION has caused this
Subscription Receipt Certificate to be signed by its officers or other
individuals duly authorized in that behalf as of February 22, 2006.

 

	
   

  	
  U.S. GOLD CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 

This Subscription Receipt Certificate is one of the
Subscription Receipt Certificates referred to in the Subscription Receipt
Indenture.

 

	
   

  	
  EQUITY TRANSFER SERVICES INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

4

 

FORM OF TRANSFER

 

Equity Transfer Services Inc.

Suite 420, 120 Adelaide Street West

Toronto, Ontario, M5H 4C3

 

FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers to                                                                                                                                                                                                                                                                                                                           
(print name and address) the Subscription Receipts represented by this
Subscription Receipt Certificate and hereby appoints the Secretary of the
Corporation as its attorney with full power of substitution to transfer the
Subscription Receipts on the appropriate register of the Subscription Receipt
Agent.

 

DATED this
          day
of                                     ,
200    .

 

	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  	
   

  
	
   

  	
  )

  	
  Signature of Transferor

  
	
   

  	
  )

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  
	
  Signature Guaranteed

  	
  )

  	
  Name of Transferor

  
	
   

  	
  )

  	
   

  
					

 

CERTAIN
REQUIREMENTS RELATING TO TRANSFERS

 

1.                                    In the case of any transfer of Subscription Receipts to a Person
resident in, or otherwise subject to the securities laws of, any province or
territory of Canada, either the
transferee must be an “accredited investor” within the meaning of such
applicable securities laws in Canada or the transfer must otherwise be exempt
from the prospectus and registration requirements of applicable securities laws
in Canada.

 

2.                                    The Subscription Receipt Indenture contains certain other
requirements relating to the transfer of Subscription Receipts, if the
Registration Statement has not been declared effective.

 

3.                                    The signature of the transferor must correspond in every particular
with the surname and the first name(s) or initials shown on the face of this
certificate and the endorsement must be signature guaranteed, in either case,
by a Canadian chartered bank, a major trust company in Canada, a firm which is
a member of a recognized stock exchange in Canada, a national securities
exchange in the United States, or the National Association of Securities
dealers or a member of a recognized securities transfer agents medallion
program (STAMP). The stamp affixed thereon by the guarantor must bear the
actual words “signature guarantee”, or “signature medallion guaranteed” and
otherwise be in accordance with industry standards.

 

 

SCHEDULE B
TO THE SUBSCRIPTION RECEIPT INDENTURE DATED AS OF

FEBRUARY 22, 2006 BETWEEN U.S. GOLD CORPORATION,

GMP SECURITIES L.P. AND EQUITY TRANSFER SERVICES INC.

 

TO:                                                                            EQUITY TRANSFER SERVICES INC.

AND TO:                                             GMP SECURITIES L.P.

 

RELEASE
NOTICE

 

Reference is made to the subscription receipt
indenture dated as of February 22, 2006 (the “Subscription Receipt
Indenture”) between U.S. Gold Corporation (the “Corporation”), GMP Securities
L.P. and Equity Transfer Services Inc. Unless otherwise defined herein, words
and terms with the initial letter or letters thereof capitalized shall have the
meanings given to such words and terms in the Subscription Receipt Indenture.

 

The Corporation by its President and CEO represents,
warrants and confirms on behalf of the Corporation and not in a personal
capacity that each of the Release Conditions have been satisfied or waived by
the Agent,

 

and, accordingly:

 

(a)                                  in accordance with section 2.02 of the Subscription Receipt Indenture,
Subscription Receipts shall entitle the holders thereof to receive, upon
conversion thereof in accordance with the provisions of the Subscription
Receipt Indenture, Common Share and Warrants, which the Subscription Receipt
Agent is hereby authorized and directed to issue in accordance with the terms
of the Subscription Receipt Indenture; and

 

(b)                                 in accordance with article six of the Subscription Receipt
Indenture, the Subscription Receipt Agent is hereby authorized and directed to:

 

(i)                                  release $<>
of the Escrowed Proceeds (and interest earned thereon) to the Agent by means of
a bank draft or certified cheque payable to “GMP Securities L.P.”

 

(ii)                               retain $<> of the
Escrowed Proceeds

 

(iii)                            release the balance of the Proceeds together with all interest
earned on the Escrowed Proceeds to the Corporation by means of
                                                                                                                                  

                                                                                                                                                                           .

 

 

This Release 
Notice, which may be signed in counterparts and delivered by
facsimile, is irrevocable and shall constitute your good and sufficient
authority for taking the actions described herein.

 

DATED as of this
           day of
                         ,
200    .

 

	
   

  	
  U.S. GOLD CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 

Acknowledged as of the
                 
day of
                    ,
200    .

 

 

	
   

  	
  GMP SECURITIES L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

2

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