Document:

Pacific Rim Mining Corp.: Exhibit 4.1 - Filed by newsfilecorp.com

SHAREHOLDER RIGHTS PLAN AGREEMENT

Dated as of September 6, 2012

Between

PACIFIC RIM MINING CORP.

and

COMPUTERSHARE INVESTOR SERVICES INC.

as Rights Agent

(Ratified by Shareholders on September 6, 2012)

TABLE OF CONTENTS

	ARTICLE
      1 INTERPRETATION 	2
      
	1.1
      	Certain
      Definitions 	2
      
	1.2
      	Currency
      	17
      
	1.3
      	Headings
      	17
      
	1.4
      	Number
      and Gender 	17
      
	1.5
      	Calculation
      of Number and Percentage of Beneficial Ownership of Outstanding Voting
      Shares 	17
      
	1.6
      	References
      to 1933 Securities Act and 1934 Exchange Act 	18
      
	1.7
      	Acting
      Jointly or in Concert 	18
      
	1.8
      	Statutory
      References 	19
      
	  	  	  
	ARTICLE
      2 THE RIGHTS 	19
      
	2.1
      	Legend
      on Common Share Certificates 	19
      
	2.2
      	Initial
      Exercise Price, Exercise of Rights and Detachment of Rights 	20
      
	2.3
      	Adjustments
      to Exercise Price; Number of Rights 	23
      
	2.4
      	Date
      on Which Exercise is Effective 	28
      
	2.5
      	Execution,
      Authentication, Delivery and Dating of Right Certificates 	28
      
	2.6
      	Registration,
      Registration of Transfer and Exchange 	29
      
	2.7
      	Mutilated,
      Destroyed, Lost and Stolen Rights Certificates 	30
      
	2.8
      	Persons
      Deemed Owners 	30
      
	2.9
      	Delivery
      and Cancellation of Certificates 	30
      
	2.10
      	Agreement
      of Rights Holders 	31
      
	2.11
      	Rights
      Certificate Holder not Deemed a Shareholder 	32
      
	  	  	  
	ARTICLE
      3 ADJUSTMENTS TO THE RIGHTS ON FLIP-IN EVENT 	32
      
	3.1
      	Flip-in
      Event 	32
      
	3.2
      	Exchange
      Option 	34
      
	  	  	  
	ARTICLE
      4 THE RIGHTS AGENT 	34
      
	4.1
      	General
      	34
      
	4.2
      	Merger
      or Amalgamation or Change of Name of Rights Agent 	35
      
	4.3
      	Duties
      of Rights Agent 	36
      
	4.4
      	Change
      of Rights Agent 	38
      
	4.5
      	Compliance
      with Money Laundering Legislation 	38
      
	4.6
      	Privacy
      Provision 	39
      
	  	  	  
	ARTICLE
      5 MISCELLANEOUS 	39
      
	5.1
      	Redemption
      of Rights 	39
      
	5.2
      	Waiver
      of Flip-In Event 	40
      
	5.3
      	Expiration
      	42
      
	5.4
      	Issuance
      of New Rights Certificates 	42
      
	5.5
      	Supplements
      and Amendments 	42
      
	5.6
      	Fractional
      Rights and Fractional Shares 	44
      
	5.7
      	Rights
      of Action 	44
      
	5.8
      	Notice
      of Proposed Actions 	44
      

	5.9
      	Notices
      	45
      
	5.10
      	Costs
      of Enforcement 	46
      
	5.11
      	Benefits
      of this Agreement 	46
      
	5.12
      	Governing
      Law 	46
      
	5.13
      	Language
      	46
      
	5.14
      	Severability
      	46
      
	5.15
      	Effective
      Date 	47
      
	5.16
      	Reconfirmation
      	47
      
	5.17
      	Determinations
      and Actions by the Board of Directors 	47
      
	5.18
      	Rights
      of Board of Directors and the Company 	47
      
	5.19
      	Regulatory
      Approvals 	47
      
	5.20
      	Declaration
      as to Non-Canadian Holders 	48
      
	5.21
      	Time
      of the Essence 	48
      
	5.22
      	Successors
      	48
      
	5.23
      	Execution
      in Counterparts 	48
      

SHAREHOLDER RIGHTS PLAN AGREEMENT

     THIS SHAREHOLDER RIGHTS PLAN
AGREEMENT is dated as of the 6th day of September, 2012

BETWEEN:

PACIFIC RIM MINING CORP., a
company incorporated under the laws of British Columbia 
(the
"Corporation" or the "Company")

- and -

COMPUTERSHARE INVESTOR SERVICES
INC., a corporation incorporated under the laws of Canada 
(the
"Rights Agent")

     WHEREAS the Board of Directors of
the Company, in the exercise of their fiduciary duties to the Company, has
determined that it is advisable and in the best interests of the Company to
continue to have in place a shareholder rights plan (as amended hereby) (the
"Rights Plan") to (a) ensure, to the extent possible, that all holders of
the Common Shares (as hereinafter defined) of the Company and the Board of
Directors have adequate time to consider and evaluate any unsolicited bid for
the Common Shares; (b) provide the Board of Directors with adequate time to
identify, develop and negotiate value-enhancing alternatives, if considered
appropriate, to any such unsolicited bid; (c) encourage the fair treatment of
the Company's securityholders in connection with any Take-over Bid (as
hereinafter defined) made for the Common Shares; and (d) generally to assist the
Board of Directors in enhancing shareholder value;

     AND WHEREAS the Board of
Directors has determined that the Rights Plan shall continue its ongoing
effectiveness, having received the requisite approval of the "Independent
Shareholders" (as hereinafter defined);

     AND WHEREAS in order to continue
the Rights Plan, the Board of Directors has:

	 	(a) 	
      reconfirmed its authorization of the issuance of one
      right (a "Right") effective at the Record Time (as hereinafter
      defined) in respect of each Common Share outstanding at the Record Time;
      and

	 	 	 
	 	(b) 	
      reconfirmed its authorization of the issuance of one
      Right in respect of each Common Share issued after the Record Time and
      prior to the earlier of the Separation Time (as hereinafter defined) and
      the Expiration Time (as hereinafter defined);

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

- 2 -

     AND WHEREAS the Company desires
to confirm its appointment of Computershare Investor Services Inc. as the Rights
Agent to act on behalf of the Company and the holders of Rights, and the Rights
Agent has agreed to act on behalf of the Company and the holders of Rights in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates (as hereinafter defined), the exercise of Rights and other matters
referred to herein;

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

ARTICLE 1

INTERPRETATION

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

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

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

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

	 	 	 	 	 
				(A) 	
      a Corporate Acquisition which, by reducing the number of
      Voting Shares outstanding, increases the percentage of Voting Shares
      Beneficially Owned by such Person to or above 20% or more of the Voting
      Shares then outstanding;

	 	 	 	 	 
				(B) 	
      an Exempt Acquisition;

	 	 	 	 	 
				(C) 	
      a Permitted Bid Acquisition;

	 	 	 	 	 
				(D) 	
      a Pro Rata Acquisition; or

	 	 	 	 	 
				(E) 	
      a Convertible Security Acquisition;

	 	 	 	 	 
				
      provided, however, that if a Person becomes the
      Beneficial Owner of 20% or more of the Voting Shares then outstanding by
      reason of one or any combination of a Corporate Acquisition, an Exempt
      Acquisition, a Permitted Bid Acquisition, a Pro Rata Acquisition or a
      Convertible Security Acquisition, and thereafter such Person, while such
      Person is the Beneficial Owner of 20% or more of the Voting Shares then
      outstanding, becomes the Beneficial Owner of any additional Voting Shares
      (other than pursuant to any one or a combination of a Corporate
      Acquisition, an Exempt Acquisition, a Permitted Bid Acquisition, a Pro
      Rata Acquisition or a Convertible Security Acquisition), then as of the date
such Person becomes the Beneficial Owner of such additional Voting Shares, such
Person shall become an Acquiring Person;

- 3 -

	 	(iii) 	
      a Person who is the Beneficial Owner of 20% or more of
      the outstanding Voting Shares determined as at the Record Time (a
      "Grandfathered Person"); provided, however, that this exemption
      shall not be, and shall cease to be, applicable to a Grandfathered Person
      in the event that such Grandfathered Person shall, after the Record Time,
      become the Beneficial Owner of any Voting Shares not Beneficially Owned by
      such Person as at the Record Time (other than through any one or any
      combination of a Corporate Acquisition, an Exempt Acquisition, a Permitted
      Bid Acquisition, a Pro Rata Acquisition or a Convertible Security
      Acquisition);

	 	 	 
	 	(iv) 	
      a Subsequent Grandfathered Person, provided, however,
      that this exemption shall not be, and shall cease to be, applicable to a
      Subsequent Grandfathered Person in the event that such Subsequent
      Grandfathered Person shall, after the completion of the transaction
      pursuant to which such Person became a Subsequent Grandfathered Person,
      become the Beneficial Owner of any additional Voting Shares (other than
      through any one or any combination of a Corporate Acquisition, an Exempt
      Acquisition, a Permitted Bid Acquisition, a Pro Rata Acquisition or a
      Convertible Security Acquisition);

	 	 	 
	 	(v) 	
      for a period of ten days after the Disqualification Date
      (as hereinafter defined), any Person who becomes the Beneficial Owner of
      20% or more of the outstanding Voting Shares as a result of such Person
      becoming disqualified from relying on Clause (v) of the definition of
      Beneficial Owner solely because such Person makes or announces an
      intention to make a Take-over Bid in respect of Voting Shares and/or
      Convertible Securities either alone or by acting jointly or in concert
      with any other Person. For the purposes of this definition,
      "Disqualification Date" means the first date of a public
      announcement of facts indicating that any Person is making or intends to
      make a Take-over Bid, either alone, through such Person's Affiliates or
      Associates or by acting jointly or in concert with any other Person;
    or

	 	 	 
	 	(vi) 	
      an underwriter or member of a banking or selling group
      that in that capacity becomes the Beneficial Owner of 20% or more of
      Voting Shares of the Company in connection with a distribution of
      securities of the Company pursuant to a prospectus or by way of private
      placement;

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

- 4 -

	 	(c) 	
      "Agreement" means this agreement dated as of
      September 6, 2012 between the Company and the Rights Agent, as amended,
      modified or supplemented from time to time; "hereof",
      "herein", "hereto" and similar expressions mean and refer to
      this shareholder rights plan agreement as a whole and not to any
      particular part of this Agreement;

	 	 	 	 
	 	(d) 	
      "Associate", when used to indicate a relationship
      with a specified Person, shall mean (i) any corporation of which such
      Person beneficially owns, directly or indirectly, voting securities
      carrying more than 10% of the voting rights attached to all voting
      securities of such corporation for the time being outstanding, (ii) any
      partner of that Person, (iii) any trust or estate in which such Person has
      a substantial beneficial interest or as to which such Person serves as
      trustee or in a similar capacity, (iv) a spouse of such specified Person,
      (v) any Person of either sex with whom such specified Person is living in
      conjugal relationship outside marriage or (vi) any relative of such
      specified Person or of Person mentioned in Clauses (iv) or (v) of this
      definition if that relative has the same residence as the specified
      Person;

	 	 	 	 
	 	(e) 	
      a Person shall be deemed the "Beneficial Owner"
      of, and to have "Beneficial Ownership" of, and to "Beneficially
      Own":

	 	 	 	 
	 		(i) 	
      any securities as to which such Person or any of such
      Person's Affiliates or Associates is the owner at law or in equity
      including, for greater certainty, pursuant to section 1.8 of MI 62-104
      (other than subsection (4) thereof);

	 	 	 	 
	 		(ii) 	
      any securities as to which such Person or any of such
      Person's Affiliates or Associates has the right to acquire or become the
      owner at law or in equity, whether such right is exercisable immediately
      or after the passage of time and whether or not on condition or the
      happening of any contingency or the making of any payment, upon the
      exercise of any conversion right, exchange right or purchase right
      attaching to Convertible Securities, or pursuant to any agreement,
      arrangement, pledge or understanding, whether or not in writing (other
      than (x) customary agreements with and between underwriters and/or banking
      group members and/or selling group members with respect to a distribution
      of securities pursuant to a prospectus or by way of private placement and
      (y) pledges of securities in the ordinary course of business of the lender
      granted as security for bona fide indebtedness); and

	 	 	 	 
	 		(iii) 	
      any securities which are Beneficially Owned within the
      meaning of Clauses (i) and (ii) of this definition by any other Person
      with whom such Person is acting jointly or in concert with respect to the
      Company or any of its securities or assets;

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

- 5 -

	 	(iv) 	
      where (1) the holder of such security has agreed to
      deposit or tender such security pursuant to a Permitted Lock-up Agreement
      to a Take-over Bid made by such Person or any of such Person's Affiliates
      or Associates or any other Person referred to in Clause (iii) of this
      definition, or (2) such security has been deposited or tendered pursuant
      to a Take-over Bid made by such Person or any of such Person's Affiliates
      or Associates or any other Person referred to in Clause (iii) of this
      definition, in each case until the earliest time at which any such
      tendered security is accepted unconditionally for payment or exchange or
      is taken up and paid for

	 	 	 	 
	 	(v) 	
      where such Person, any of such Person's Affiliates or
      Associates or any other Person referred to in Clause (iii) of this
      definition holds such security provided that:

	 	 	 	 
	 		(A) 	
      the ordinary business of any such Person (the
      "Investment Manager") includes the management of investment funds
      for others (which others, for greater certainty, may include or be limited
      to one or more employee benefit plans or pension plans) and includes the
      acquisition or holding of securities for a non- discretionary account of a
      Client (as defined below) by a dealer or broker registered under
      applicable securities laws to the extent required and such security is
      held by the Investment Manager in the ordinary course of such business in
      the performance of such Investment Manager's duties for the account of any
      other Person (a "Client");

	 	 	 	 
	 		(B) 	
      such Person (the "Trust Company") is licensed to
      carry on the business of a trust company under applicable laws and, as
      such, acts as trustee or administrator or in a similar capacity in
      relation to the estates of deceased or incompetent Persons (each an
      "Estate Account") or in relation to other accounts (each an
      "Other Account") and holds such security in the ordinary course of
      such duties for the estate of any such Estate Account or for such Other
      Accounts;

	 	 	 	 
	 		(C) 	
      such Person (the "Statutory Body") is established
      by statute for purposes that include, and the ordinary business or
      activity of such Person includes, the management of investment funds for
      employee benefit plans, pension plans, insurance plans or various public
      bodies and the Statutory Body holds such security in the ordinary course
      of and for the purposes of the management of such investment
  funds;

	 	 	 	 
	 		(D) 	
      such person (the "Administrator") is the
      administrator or trustee of one or more pension funds or plans (a
      "Plan") registered under the laws of Canada or any Province thereof
      or the corresponding laws of the jurisdiction by which such Plan is
      governed and the Administrator holds such security for the purposes of its
activities as such; or

- 6 -

	 	(E) 	such Person is a Crown agent or agency; 
	 	  	  
	 	
      but only if the Investment Manager, the Trust Company,
      the Statutory Body, the Administrator or the Crown agent or agency, as the
      case may be, (A) did not acquire and does not Beneficially Own or hold
      such security for the purpose of or with the effect of changing or
      influencing the control of the issuer thereof, either alone or acting
      jointly or in concert with any other Person, or in connection with or as a
      participant in any transaction having that purpose or effect, (B) is not
      then making a Take- over Bid in respect of securities of the Company or
      has not then announced an intention to make a Take-over Bid in respect of
      securities of the Company and (C) is not then acting jointly or in concert
      with any other Person who is making a Take-over Bid or who has announced
      an intention to make a Take-over Bid, other than an Offer to Acquire
      Voting Shares or other securities of the Company (1) pursuant to a
      distribution by the Company or (2) by means of a Permitted Bid or a
      Competing Permitted Bid, or (3) by means of ordinary market transactions
      (including prearranged trades entered into in the ordinary course of the
      business of such Person) executed through the facilities of a stock
      exchange or organized over-the-counter market;

	 	(vi) 	
      because such Person is

	 	 	 	 
	 		(A) 	
      a Client of or has an account with the same Investment
      Manager as another Person on whose account the Investment Manager holds
      such security,

	 	 	 	 
	 		(B) 	
      an Estate Account or an Other Account of the same Trust
      Company as another Person on whose account the Trust Company holds such
      security; or

	 	 	 	 
	 		(C) 	
      a Plan with the same Administrator as another Plan on
      whose account the Administrator holds such security;

	 	 	 	 
	 	(vii) 	
      where such Person is

	 	 	 	 
	 		(A) 	
      a Client of an Investment Manager and such security is
      owned at law or in equity by the Investment Manager;

	 	 	 	 
	 		(B) 	
      an Estate Account or an Other Account of a Trust Company
      and such security is owned at law or in equity by the Trust Company;
    or

	 	 	 	 
	 		(C) 	
      a Plan and such security is owned at law or in equity by
      the Administrator of the Plan; or

- 7 -

	 	(viii) 	
      where such Person is the registered holder of securities
      as a result of carrying on the business of or acting as a nominee of the
      securities depository;

	 	(f) 	
      "Board of Directors" shall mean the board of
      directors of the Company, as constituted from time to time;

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

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

	 	 	 	 
	 	(i) 	
      "Canadian Dollar Equivalent" of any amount which
      is expressed in United States dollars shall mean, on any date, the
      Canadian dollar equivalent of such amount determined by multiplying such
      amount by the U.S. - Canadian Exchange Rate in effect on such
  date;

	 	 	 	 
	 	(j) 	
      "close of business" on any given date shall mean
      the time on such date (or, if such date is not a Business Day, the time on
      the next succeeding Business Day) at which the office of the transfer
      agent for the Common Shares in the City of Vancouver, British Columbia
      (or, after the Separation Time, the office of the Rights Agent in the City
      of Vancouver, British Columbia) is closed to the public;

	 	 	 	 
	 	(k) 	
      "Common Shares" shall mean the common shares in
      the capital of the Company as constituted on the date hereof and any other
      share of the Company into which such shares may be sub-divided,
      consolidated, re-classified or changed;

	 	 	 	 
	 	(l) 	
      "Competing Permitted Bid" shall mean a Take-over
      Bid that:

	 	 	 	 
	 		(i) 	
      is made after a Permitted Bid has been made and prior to
      the expiry of that Permitted Bid (in this definition, the "Prior
      Bid");

	 	 	 	 
	 		(ii) 	
      satisfies all the components of the definition of a
      Permitted Bid except the requirements set out in Clause (ii) of that
      definition; and

	 	 	 	 
	 		(iii) 	
      contains, and the take-up and payment for securities
      tendered or deposited is subject to, an irrevocable and unqualified
      condition that no Voting Shares shall be taken up or paid for pursuant to
      the Take-over Bid prior to the close of business on the date that is no
      earlier than the later of: (i) 35 days (or such other minimum period of
      days as may be prescribed by MI 62-104) after the announcement of such
      Competing Permitted Bid; and (ii) the 60th date after the date on which
      the earliest Permitted Bid which preceded the Competing Permitted Bid was
      made and then only if at that date more than 50% of the then outstanding
      Voting Shares held by Independent Shareholders have been deposited or tendered
pursuant to such Take-over Bid and not withdrawn;

- 8 -

	 	(m) 	
      "controlled": a Person is considered to be
      "controlled" by another Person or two or more Persons if:

	 	 	 	 	 
	 		
      (i) 
	
      in the case of a Person other than a partnership or a
      limited partnership, including, without limitation, a corporation or body
      corporate:

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

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

	 	 	
       
	 	 
	 		
      (ii) 
	
      in the case of a partnership other than a limited
      partnership, more than 50% of the interests in such partnership are held
      by the other Person or Persons; and

	 	 	
       
	 	 
	 		
      (iii) 
	
      in the case of a limited partnership, the other Person or
      each of the other Persons is a general partner of the limited
      partnership,

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

	 	 	
       
	 	 
	 	(n)	
      "Convertible Securities" shall mean at any time
      any securities issued by the Company (including rights, warrants and
      options but excluding the Rights) carrying any purchase, exercise,
      conversion or exchange rights, pursuant to which the holder thereof may
      acquire Voting Shares or other securities convertible into or exercisable
      or exchangeable for Voting Shares (in each case, whether such right is
      exercisable immediately or after a specified period and whether or not on
      conditions or the happening of any contingency);

	 	 	
       
	 	 
	 	(o)	
      "Convertible Security Acquisition" shall mean the
      acquisition of Voting Shares upon the exercise of Convertible Securities
      acquired by a Person pursuant to a Permitted Bid Acquisition, an Exempt
      Acquisition or a Pro Rata Acquisition;

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

	 	 	
       
	 	 
	 	(q) 	
      "Corporate Acquisition" shall mean an acquisition
      or a redemption of Voting Shares by the Company which by reducing the
      number of Voting Shares outstanding increases the proportionate number of
      Voting Shares Beneficially Owned by any Person;

	 	 	
       
	 	 
	 	(r)	
      "Election to Exercise" shall have the meaning
      attributed thereto in Clause 2.2(d)(ii);

- 9 -

	 	(s) 	
      "Exchange" mean the Toronto Stock Exchange or, if
      the Common Shares are not listed at the applicable time on the Toronto
      Stock Exchange, then the stock exchange having jurisdiction over the
      Company;

	 	 	 	 
	 	(t) 	
      "Exempt Acquisition" shall mean an acquisition of
      Voting Shares or Convertible Securities:

	 	 	 	 
	 		
      (i) 
	
      in respect of which the Board of Directors has waived the
      application of Section 3.1 pursuant to the provisions of Section 5.2 or
      which was made on or prior to the Record Time; or

	 	 	
       
	
       

	 		
      (ii) 
	
      pursuant to a distribution of Voting Shares or
      Convertible Securities (and the conversion or exchange of such Convertible
      Securities) made by the Company pursuant to a prospectus or pursuant to a
      private placement or other distribution made by the Company exempt from
      the prospectus requirements of applicable law;

	 	 	
       
	
       

	 	(u)	
      "Exercise Price" shall mean, as of any date, the
      price at which a Holder may purchase the securities issuable upon exercise
      of one whole Right. Until adjustment thereof in accordance with the terms
      hereof, the Exercise Price shall be $100;

	 	 	
       
	
       

	 	(v)	
      "Expiration Time" shall mean the earlier
  of:

	 	 	
       
	
       

	 		
      (i) 
	
      the Termination Time;

	 	 	
       
	
       

	 		
      (ii) 
	
      the termination of the third annual meeting of the
      shareholders of the Company occurring after the effective date of this
      Agreement as provided for in Section 5.15 hereof if the continuation of
      the Rights Plan is not submitted to holders of Voting Shares for their
      approval at such meeting or, if so submitted, is not approved by a
      majority of the votes cast by Independent Shareholders present or
      represented by proxy; and

	 	 	
       
	
       

	 		
      (iii) 
	
      the close of the third annual meeting of shareholders of
      the Company occurring after the date of approval of the continuation of
      the Rights Plan pursuant to Clause (ii) above or this Clause (iii) if the
      continuation of the Rights Plan is not submitted to holders of Voting
      Shares for their approval at such meeting or, if so submitted, is not
      approved by a majority of the votes cast by Independent Shareholders
      present or represented by proxy;

	 	 	
       
	
       

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

	 	 	
       
	
       

	 	(x)	
      "Holder" of any Rights, unless the context
      otherwise requires, shall mean the registered holder of such Rights (or,
      prior to the Separation Time, of the associated Common Shares);

	 	 	
       
	
       

	 	(y)	
      "Independent Shareholders" shall mean the holders
      of Voting Shares other than:

- 10 -

	 	
      (i) 
	
      any Acquiring Person;

	 	
       
	 
	 	
      (ii) 
	
      any Grandfathered Person;

	 	
       
	 
	 	
      (iii) 
	
      any Offeror;

	 	
       
	 
	 	
      (iv) 
	
      any Associate or Affiliate of such Acquiring Person, such
      Grandfathered Person or such Offeror;

	 	
       
	 
	 	
      (v) 
	
      any Person acting jointly or in concert with such
      Acquiring Person, such Grandfathered Person or such Offeror; and

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

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

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

	 	 	
       
	 
	 		
      (ii) 
	
      if for any reason none of such prices described in Clause
      (i) above is available for such day or the securities are not listed or
      admitted to trading on a Canadian stock exchange, the last sale price or,
      if such price is not available, the average of the closing bid and asked
      prices, for each such security on such date, as reported by such other
      securities exchange on which such securities are listed or admitted to
      trading;

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

- 11 -

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

provided, however, that if on any such
date none of such prices is available, the closing price per security of such
securities on such date shall mean the fair value per security of such
securities on such date as determined in good faith by a nationally or
internationally recognized firm of investment dealers or investment bankers
selected by the Board of Directors. The Market Price shall be expressed in
Canadian dollars and, if initially determined in respect of any day forming part
of the 20 consecutive Trading Day period in question in United States dollars,
such amount shall be translated into Canadian dollars on such date at the
Canadian Dollar Equivalent thereof;

	 	(aa) 	
      "1933 Securities Act" shall mean the United States
      Securities Act of 1933, as amended, and the rules and regulations
      thereunder, and any comparable or successor laws or regulations
      thereto;

	 	 	 	 
	 	(bb) 	
      "1934 Exchange Act" shall mean the United States
      Securities Exchange Act of 1934, as amended, and the rules and
      regulations thereunder, and any comparable or successor laws or
      regulations thereto;

	 	 	 	 
	 	(cc) 	
      "MI 62-104" means Multilateral Instrument 62-104
      adopted by the British Columbia Securities Commission effective February
      1, 2008, as amended from time to time and any comparable or successor
      laws, rules or regulations thereto;

	 	 	 	 
	 	(dd) 	
      "Nominee" shall have the meaning ascribed thereto
      in Subsection 2.2(c);

	 	 	 	 
	 	(ee) 	
      "Offer to Acquire" shall include:

	 	 	 	 
	 		(i) 	
      an offer to purchase, a public announcement of an
      intention to make an offer to purchase, or a solicitation of an offer to
      sell, Voting Shares, and

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

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

- 12 -

	 	(ff) 	
      "Offeror" shall mean a Person who has announced an
      intention to make or who is making a Take-over Bid;

	 	 	 	 
	 	(gg) 	
      "Offeror's Securities" shall mean Voting Shares
      Beneficially Owned by an Offeror, on the date of an Offer to
    Acquire;

	 	 	 	 
	 	(hh) 	
      "Permitted Bid" shall mean a Take-over Bid made by
      an Offeror that is made by means of a take-over bid circular and which
      also complies with the following additional provisions:

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

	 	 	
       
	 
	 		
      (ii) 
	
      the Take-over Bid contains, and the take-up and payment
      for securities tendered or deposited thereunder is subject to, an
      irrevocable and unqualified condition that no Voting Shares shall be taken
      up or paid for pursuant to the Take-over Bid prior to the close of
      business on the date which is not less than 60 days after the date of the
      Take-over Bid; and only if at such date more than 50% of the Voting Shares
      held by Independent Shareholders shall have been deposited or tendered
      pursuant to the Take-over Bid and not withdrawn at the close of business
      on the date of first take up or payment for Voting Shares;

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

	 	 	
       
	 
	 		
      (iv) 
	
      the Take-over Bid contains an irrevocable and unqualified
      provision that if, on the date on which Voting Shares may be taken up and
      paid for, more than 50% of the Voting Shares held by Independent
      Shareholders shall have been deposited or tendered pursuant to the
      Take-over Bid and not withdrawn, the Offeror will make a public
      announcement of that fact and the Take-over Bid will remain open for
      deposits and tenders of Voting Shares for not less than 10 Business Days
      from the date of such public announcement;

	 	 	
       
	 
	 	(ii)	
      "Permitted Bid Acquisitions" shall mean
      acquisitions of Voting Shares made pursuant to a Permitted Bid or a
      Competing Permitted Bid;

	 	 	
       
	 
	 	(jj)	
      "Permitted Lock-up Agreement" shall mean an
      agreement (the "Lock-up Agreement") between a Person and one or
      more holders of Common Shares (each such holder herein referred to as a
      "Locked-up Person") (the terms of which are publicly disclosed and
      a copy of which is made available to the
public (including the Corporation) not later
than the date of the Lock-up Bid (as defined below), or if the Lock-up Bid has
been made prior to the date of the Lock-up Agreement not later than the first
Business Day following the date of the Lock-up Agreement) pursuant to which each
Locked-up Person agrees to deposit or tender the Common Shares held by such
holder to a Take-over Bid (the "Lock-up Bid") made by the Person or any
of such Person's Affiliates or Associates or any other Person referred to in
Clause 1.1(e)(iii), provided that:

- 13 -

	 	(i) 	
      the Lock-up Agreement permits the Locked-up Person to
      withdraw its Common Shares from the Lock-up Agreement in order to deposit
      or tender the Common Shares to another Take-over Bid or to support another
      transaction prior to the Common Shares being taken up and paid for under
      the Lock-up Bid at a price or value per Common Share that exceeds the
      price or value per Common Share offered under the Lock-up Bid;
or

	 	 	 
	 	(ii) 	
      the Lock-up Agreement permits the Locked-up Person to
      withdraw its Common Shares from the Lock-up Agreement in order to deposit
      or tender the Common Shares to another Take-over Bid or to support another
      transaction prior to the Common Shares being taken up and paid for under
      the Lock-up Bid at an offer price for each Common Share that exceeds by as
      much as or more than a specified amount (the "Specified Amount")
      the offer price for each Common Share contained in or proposed to be
      contained in the Lock-up Bid and that does not by its terms provide for a
      Specified Amount that is greater than 7% of the offer price contained in
      or proposed to be contained in the Lock-up Bid;

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

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

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

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

	 	 	 	 
	 		
      shall be payable by such Locked-up Person if the
      Locked-up Person fails to deposit or tender Common Shares to the Lock-up
      Bid, or withdraws Common Shares previously tendered thereto in order to deposit
or tender such Common Shares to another Take-over Bid or support another
transaction; 

- 14 -

	 	(kk) 	
      "Person" shall include any individual, firm,
      partnership, association, trust, trustee, executor, administrator, legal
      personal representative, government, governmental entity or authority,
      body corporate, corporation, incorporated or unincorporated organization,
      syndicate or other entity;

	 	 	 	 
	 	(ll) 	
      "Pro Rata Acquisition" shall mean an acquisition
      by a Person of Voting Shares or Convertible Securities:

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

	 	 	
       
	 
	 		
      (ii) 
	
      pursuant to any regular dividend reinvestment plan or
      other plan made available by the Company to holders of all of its
      securities where such plan permits the holder to direct that some or all
      of: (A) dividends paid in respect of shares of any class of the Company,
      (B) proceeds of redemption of shares of the Company, (C) interest paid on
      evidences of indebtedness of the Company, or (D) optional cash payments be
      applied to the purchase from the Company of further securities of the
      Company;

	 	 	
       
	 
	 		
      (iii) 
	
      pursuant to the receipt and/or exercise by the Person of
      rights (other than the Rights) issued by the Company to all of the holders
      of a series or class of Voting Shares on a pro-rata basis to subscribe for
      or purchase Voting Shares or Convertible Securities, provided that such
      rights are acquired directly from the Company and not from any other
      Person; or

	 	 	
       
	 
	 		
      (iv) 
	
      pursuant to a plan of arrangement, amalgamation or other
      statutory procedure requiring shareholder approval;

	 	 	
       
	 
	 	(mm)	
      "Record Time" shall mean one minute after the
      close of the annual general meeting of the shareholders of the Company
      held on September 6, 2012;

	 	 	
       
	 
	 	(nn)	
      "Redemption Price" shall have the meaning
      attributed thereto in Subsection 5.1(a);

	 	 	
       
	 
	 	(oo)	
      "regular periodic cash dividend" shall mean cash
      dividends paid in any fiscal year of the Company to the extent that such
      cash dividends do not exceed, in the aggregate, the greatest of

	 	 	
       
	 
	 		
      (i) 
	
      200% of the aggregate amount of cash dividends declared
      payable by the Company on its Common Shares in its immediately preceding
      fiscal year;

- 15 -

	 	(ii) 	
      300% of the arithmetic mean of the aggregate amounts of
      the annual cash dividends declared payable by the Company on its Common
      Shares in its three immediately preceding fiscal years; and

	 	 	 
	 	(iii) 	
      100% of the aggregate consolidated net income of the
      Company, before extraordinary items, for its immediately preceding fiscal
      year;

	 	(pp) 	
      "Rights" shall mean the herein described rights to
      purchase securities pursuant to the terms and subject to the conditions
      set forth herein;

	 	 	 	 
	 	(qq) 	
      "Rights Certificate" shall have the meaning
      attributed thereto in Clause 2.2(c)(i);

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

	 	 	 	 
	 	(ss) 	
      "Securities Act (BC)" shall mean the Securities
      Act, R.S.B.C. 1996, c. 418, and the rules and regulations thereunder,
      each as may be amended from time to time, and any comparable or successor
      laws, rules or regulations thereto;

	 	 	 	 
	 	(tt) 	
      "Separation Time" shall mean, subject to Section
      5.2, the close of business on the tenth Trading Day after the earliest
      of:

	 	 	 	 
	 		
      (i) 
	
      the Stock Acquisition Date;

	 	 	
       
	 
	 		
      (ii) 
	
      the date of the commencement of, or first public
      announcement of the intent of any Person (other than the Company or any
      Subsidiary of the Company) to commence, a Take-over Bid (other than a
      Permitted Bid or a Competing Permitted Bid or Take-over Bid in respect of
      which the Board of Directors has waived the application of Section 3.1);
      and

	 	 	
       
	 
	 		
      (iii) 
	
      the date upon which a Permitted Bid or Competing
      Permitted Bid ceases to be such;

	 	 	
       
	 
	 		
      or such later date as may be determined by the Board of
      Directors acting in good faith, provided that if the foregoing results in
      a Separation Time being prior to the Record Time, the Separation Time
      shall be the Record Time, and provided further that if any Take-over Bid
      referred to in Clause (ii) of this definition expires, is cancelled,
      terminated or otherwise withdrawn prior to the Separation Time, such
      Take-over Bid shall be deemed, for the purposes of this definition, never
      to have been made and if the Board of Directors determines pursuant to
      Section 5.2 to waive the application of Section 3.1 to a Flip-In Event,
      then the Separation Time shall be deemed never to have occurred;

	 	 	
       
	 
	 	(uu)	
      "Stock Acquisition Date" shall mean the first date
      of public announcement (which, for purposes of this definition, shall
      include, without limitation, a report filed pursuant to MI 62-104 or
      Section 13(d) under the 1934 Exchange Act) by the Company or a Person of
      facts indicating that any Person has become an Acquiring
  Person;

- 16 -

	 	(vv) 	
      "Subsequent Grandfathered Person" shall mean a
      Person who, after the Record Time, acquires all of the Voting Shares
      Beneficially Owned by a Grandfathered Person, provided that:

	 	 	 	 
	 		(i) 	
      such Person does not Beneficially Own any other Voting
      Shares at the time of such acquisition; and

	 	 	 	 
	 		(ii) 	
      such transaction is completed in compliance with
      applicable securities laws;

	 	 	 	 
	 	(ww) 	
      "Subsidiary": a body corporate is a Subsidiary of
      another body corporate if:

	 	 	 	 
	 		(i) 	
      it is controlled by (A) that other, or (B) that other and
      one or more bodies corporate, each of which is controlled by that other,
      or (C) two or more bodies corporate, each of which is controlled by that
      other, or

	 	 	 	 
	 		(ii) 	
      it is a Subsidiary of a body corporate that is that
      other's Subsidiary;

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

	 	 	 	 
	 	(yy) 	
      "Termination Time" shall mean the time at which
      the right to exercise Rights shall terminate pursuant to Subsection
      5.1(d), Subsection 3.2(b), Section 5.15 or Section 5.16 hereof;

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

	 	 	 	 
	 	(aaa) 	
      "U.S. - Canadian Exchange Rate" shall mean, on any
      date:

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

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

- 17 -

	 	(bbb) 	
      "Voting Shares" shall mean, collectively, the
      Common Shares of the Company and any other shares of capital stock or
      voting interests of the Company entitled to vote generally in the election
      of all directors.

1.2 Currency

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

1.3 Headings

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

1.4 Number and Gender

     Wherever the context so requires,
terms used herein importing the singular number only shall include the plural
and vice-versa and words importing only one gender shall include all others.

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

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

	 	100 x A/B 
	 	 	 
	 	Where: 
	 	  	  	  
	 	A 	= 	the number of votes for the election of all
      directors generally attaching to the Voting Shares Beneficially Owned by
      such Person; and 
	 	  	  	  
		B 	= 	the number of votes for the election of all
      directors generally attaching to all outstanding Voting Shares.
  

     Where any Person is deemed to
Beneficially Own unissued Voting Shares which may be acquired pursuant to
Convertible Securities, such Voting Shares shall be deemed to be outstanding for
the purpose of calculating the percentage of Voting Shares Beneficially Owned by
such Person in both the numerator and the denominator above, but no other
unissued Voting Shares which may be acquired pursuant to any other outstanding
Convertible Securities shall, for the purposes of that calculation, be deemed to
be outstanding.

- 18 -

1.6 References to 1933 Securities Act and 1934
Exchange Act

     For the purposes of this
Agreement, the references herein to the 1933 Securities Act or the 1934 Exchange
Act shall have no force and effect during such time as the Company is not
subject to the provisions of such Acts.

1.7 Acting Jointly or in Concert

     For the purposes of this
Agreement, it is a question of fact as to whether a Person is acting jointly or
in concert with another Person and, without limiting the generality of the
foregoing, the following shall be deemed to be acting jointly or in concert with
a Person (the "First Person"):

	 	(a) 	
      every Person who has any agreement, arrangement,
      commitment or understanding (whether formal or informal and whether or not
      in writing) with the First Person, any Associate or Affiliate of the First
      Person or any other Person acting jointly or in concert with the First
      Person, for the purpose of acquiring or Offering to Acquire any Voting
      Shares of the Company, including, without limitation, any one or more of,
      or any combination of, (i) a put, call, option, forward sale purchase or
      other right or obligation relating to the sale or disposition of any
      Voting Shares of the Company to the First Person, any Associate or
      Affiliate of the First Person or any other Person acting jointly or in
      concert with the First Person (whether settled by delivery of securities,
      cash or a combination thereof); (ii) any security the value of which
      varies with the value of Voting Shares of the Company; or (iii) any
      agreement, arrangement, commitment or understanding (whether formal or
      informal and whether or not in writing) pursuant to which all or
      substantially all of the economic or market risk underlying a Voting Share
      of the Company, directly or indirectly, is transferred to, or assumed by,
      the First Person, any Associate or Affiliate of the First Person or any
      other Person acting jointly or in concert with the First Person;

	 	 	 
	 	(b) 	
      every Person who has any agreement, arrangement,
      commitment or understanding (whether formal or informal and whether or not
      in writing) with the First Person, any Associate or Affiliate of the First
      Person or any other Person acting jointly or in concert with the First
      Person, for the purpose or with the intention of exercising jointly or in
      concert with the First Person, any Associate or Affiliate of the First
      Person or any other Person acting jointly or in concert with the First
      Person, any voting rights attaching to any securities of the Company;
      and

	 	 	 
	 	(c) 	
      every Person who has any agreement, arrangement,
      commitment or understanding (whether formal or informal and whether or not
      in writing) with the First Person, any Associate or Affiliate of the First
      Person or any other Person acting jointly or in concert with the First
      Person, for the purpose of selling, offering to sell, acquiring or
      offering to acquire any business, asset, subsidiary or investee company of
      the Company through any one transaction or series of transactions where
      the aggregate value of the business, asset, subsidiary or investee company
      to be acquired exceeds $1,000,000, such value to be determined in good
      faith by the Board of Directors, after consultation with a nationally or
internationally recognized investment dealer or investment banker with respect
to the value of such business, asset, subsidiary or investee company.

- 19 -

Notwithstanding the foregoing and for greater certainty, the
phrase "acting jointly or in concert" shall not include conduct consisting
solely of:

	 	(1) 	
      voting or directing the vote of securities of the Company
      pursuant to a revocable proxy given in response to a particular proxy
      solicitation (other than a proxy solicitation initiated by an Offeror or
      any Associate or Affiliate of an Offeror or any other Person acting
      jointly or in concert with an Offeror); or

	 	 	 
	 	(2) 	
      voting or directing the vote of securities of the Company
      in connection with or in order to participate in a particular proxy
      solicitation (other than a proxy solicitation initiated by an Offeror or
      any Associate or Affiliate of an Offeror or any other Person acting
      jointly or in concert with an Offeror).

1.8 Statutory References

     Unless the context otherwise
requires or except as expressly provided herein, any reference herein to a
specific part, section, subsection, clause or rule of any Act or regulation
shall refer to the same as it exists on the date hereof.

ARTICLE 2

THE RIGHTS

2.1 Legend on Common Share
Certificates

     (a) Certificates issued for
Common Shares, including without limitation Common Shares issued upon the
conversion of Convertible Securities, after the Record Time but prior to the
close of business on the earlier of the Separation Time and the Expiration Time
shall evidence one Right for each Common Share represented thereby and shall
have impressed on, printed on, written on or otherwise affixed to them a legend
in substantially the following form:

Until the
Separation Time (as defined in the Rights Agreement referred to below), this
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in the Shareholder Rights Plan Agreement dated as of the
6th day of September, 2012, as amended from time to
time (the "Rights Agreement"), between Pacific Rim Mining Corp. (the
"Corporation") and Computershare Investor Services Inc., as Rights Agent, the
terms of which are hereby incorporated herein by reference and a copy of which
is on file and may be inspected during normal business hours at the principal
executive offices of the Company. Under certain circumstances, as set forth in
the Rights Agreement, such Rights may be amended, redeemed, may expire, may
become null and void (if, in certain cases, they are "Beneficially Owned" by an
"Acquiring Person", as such terms are defined in the Rights Agreement, or a
transferee thereof) or may be evidenced by separate certificates and may no
longer be evidenced by this certificate. The Company will mail or arrange for the
mailing of a copy of the Rights Agreement to the holder of this certificate
without charge as soon as is reasonably practicable after the receipt of a
written request therefor.

- 20 -

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

     (b) Registered holders of Common
Shares who have not received a share certificate and are entitled to do so on
the earlier of the Separation Time and the Expiration Time shall be entitled to
Rights as if such certificates had been issued and such Rights shall for all
purposes hereof be evidenced by the corresponding entries on the Company's
securities registers for the Common Shares.

2.2 Initial Exercise Price, Exercise of
Rights and Detachment of Rights

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

     (b) Until the Separation Time,
(i) the Rights shall not be exercisable and no Right may be exercised; and (ii)
for administrative purposes, each Right will be evidenced by the certificates
for the associated Common Share registered in the name of the holder thereof
(which certificate shall also be deemed to be a Rights Certificate) and will be
transferable only together with, and will be transferred by a transfer of, such
associated Common Share.

     (c) From and after the Separation
Time and prior to the Expiration Time, the Rights shall be exercisable and the
registration and transfer of the Rights shall be separate from and independent
of the Common Shares. Promptly following the Separation Time, the Company will
prepare and the Rights Agent will mail to each holder of record of Common Shares
as of the Separation Time and, in respect of each Convertible Security converted
into or exchanged or exercised for Common Shares after the Separation Time and
prior to the Expiration Time, promptly after such conversion, exchange or
exercise to the holder so converting, exchanging or exercising (other than an
Acquiring Person and, in respect of any Rights Beneficially Owned by such
Acquiring Person which are not held of record by such Acquiring Person, the
holder of record of such Rights (a "Nominee")), at such holder's address
as shown on the records of the Company (the Company hereby agreeing to furnish
copies of such records to the Rights Agent for this purpose),

	 	(i) 	
      a certificate (a "Rights Certificate") in
      substantially the form of Exhibit A hereto appropriately completed,
      representing the number of Rights held by such Holder at the Separation
      Time and having such marks of identification or designation and such
      legends, summaries or endorsements printed thereon as the Company may deem
      appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law, rule, regulation or judicial or
administrative order or with any rule or regulation made pursuant thereto or
with any rule or regulation of any self-regulatory organization, stock exchange
or quotation system on which the Rights may from time to time be listed or
admitted to trading, or to conform to standard usage; and

- 21 -

	 	(ii) 	
      a disclosure statement prepared by or on behalf of the
      Company describing the Rights;

provided that a Nominee shall be sent
the materials provided for in Clauses 2.2(c)(i) and (ii) in respect of all
Common Shares held of record by it which are not Beneficially Owned by an
Acquiring Person. In order for the Company to determine whether any Person is
holding Common Shares which are Beneficially Owned by another Person, the
Company may require such first mentioned Person to furnish it with such
information and documentation as the Company considers advisable.

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

	 	
      (i) 
	
      the Rights Certificate evidencing such Rights;

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

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

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

- 22 -

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

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

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

	 	
       
	 
	 	
      (iv) 
	
      when appropriate, after receipt, deliver such cash (less
      any amounts required to be withheld) to or to the order of the registered
      holder of the Rights Certificate; and

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

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

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

	 	
       
	 
		
      (ii) 
	
      take all such action as may be necessary and within its
      power to comply with any applicable requirements of the Business
      Corporations Act, the Securities Act (BC), the 1933 Securities Act, the
      1934 Exchange Act and the comparable securities legislation of each of the
      provinces and territories of Canada and any other applicable law, rule or
      regulation, in connection with the issuance and delivery of the Rights
      Certificates and the issuance of any Common Shares upon exercise of
      Rights;

	 	
       
	 
		
      (iii) 
	
      on or before the issuance thereof, use reasonable efforts
      to cause all Common Shares issued upon exercise of Rights to be listed or
      admitted to trading upon issuance on the principal exchange or exchanges
      on which the Common Shares are then listed or admitted to trading at that
      time;

	 	
       
	 
		
      (iv) 
	
      cause to be reserved and kept available out of its
      authorized and unissued Common Shares, the number of Common Shares that,
      as provided in this Agreement, will from time to time be sufficient to permit the
exercise in full of all outstanding Rights; and

- 23 -

	 	(v) 	
      pay when due and payable any and all Canadian and United
      States federal, provincial and state transfer taxes (not including any tax
      in the nature of income or capital gains taxes of the Holder or exercising
      Holder or any liability of the Company to withhold tax) and charges which
      may be payable in respect of the original issuance or delivery of the
      Rights Certificates or certificates for Common Shares or registration of
      the Common Shares in the securities register of the Company, provided that
      the Company shall not be required to pay any transfer tax or charge which
      may be payable in respect of the transfer or delivery of Rights
      Certificates or the issuance or delivery of certificates for Common Shares
      or registration of the Common Shares in the securities register of the
      Company in a name other than that of the Holder of the Rights being
      transferred or exercised.

2.3 Adjustments to Exercise Price;
Number of Rights

     (a) The Exercise Price, the
number and kind of securities subject to purchase upon exercise of each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 2.3 and in Subsection 3.1(a).

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

	 	
      (i) 
	
      declare or pay a dividend on Common Shares payable in
      Common Shares or Convertible Securities other than pursuant to any regular
      dividend reinvestment plan of the Company providing for the acquisition of
      Common Shares;

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

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

	 	
       
	 
	 	
      (iv) 
	
      issue any Common Shares, Convertible Securities or other
      capital stock of the Company in respect of, in lieu of or in exchange for
      existing Common Shares except as otherwise provided in this Section
      2.3;

the Exercise Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or other change, and the number of Common Shares or
other securities, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right shall be entitled to
receive, upon payment of the applicable Exercise Price then in effect, the
aggregate number of Common Shares or other securities, as the case may be,
which, if such Right had been exercised immediately prior to such date and at a time when the share transfer books of the Company were
open, such holder would have been entitled to receive as a result of such
dividend, subdivision, combination or reclassification.

- 24 -

     (c) In the event the Company
shall at any time after the Record Time and prior to the Expiration Time fix a
record date for the issuance of rights, options or warrants to all holders of
Common Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Common Shares, shares
having the same rights, privileges, restrictions and conditions as Common Shares
("equivalent common shares"), or securities convertible into or
exchangeable for or carrying a right to purchase Common Shares or equivalent
common shares at a price per Common Share or per equivalent common share (or, if
a security convertible into or exchangeable for or carrying a right to purchase
or subscribe for Common Shares or equivalent common shares, having a conversion,
exchange or exercise price, including the price required to be paid to purchase
such convertible or exchangeable security or right per share) less than 90% of
the Market Price per Common Share on the second Trading Day immediately
preceding such record date, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction:

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

	 	 	 
	 	(ii) 	
      the denominator of which shall be the number of Common
      Shares outstanding on such record date, plus the number of additional
      Common Shares and/or equivalent common shares to be offered for
      subscription or purchase (or into which the convertible or exchangeable
      securities or rights so to be offered are initially convertible,
      exchangeable or exercisable).

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

- 25 -

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

     (d) In the event the Company
shall at any time after the Record Time and prior to the Expiration Time fix a
record date for the making of a distribution to all holders of Common Shares
(including any such distribution made in connection with a merger in which the
Company is the continuing corporation or amalgamation) of evidences of
indebtedness or assets, including cash (other than a regular periodic cash
dividend or a dividend paid in Common Shares, but including any dividend payable
in securities other than Common Shares), subscription rights, options or
warrants (excluding those referred to in Subsection 2.3(c)) hereof at a price
per Common Share that is less than 90% of the Market Price per Common Share on
the second Trading Day immediately preceding such record date, the Exercise
Price in respect of the Rights to be in effect after such record date shall be
determined by multiplying the Exercise Price in respect of the Rights in effect
immediately prior to such record date by a fraction:

	 	(i) 	
      the numerator of which shall be the Market Price per
      Common Share on such record date, less the fair market value (as
      determined in good faith by the Board of Directors, whose determination
      shall be described in a statement filed with the Rights Agent and shall be
      binding on the Rights Agent and the Holders of Rights), on a per share
      basis, of the portion of the evidences of indebtedness, cash, assets,
      subscription rights, options or warrants so to be distributed;
  and

	 	 	 
	 	(ii) 	
      the denominator of which shall be such Market Price per
      Common Share.

Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such a
distribution is not so made, the Exercise Price shall be readjusted to be the
Exercise Price which would have been in effect if such record date had not been
fixed.

     (e) Notwithstanding anything
herein to the contrary, no adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Exercise Price; provided, however, that any adjustments which by reason of
this Subsection 2.3(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 2.3 shall be made to the nearest cent or to the nearest ten-thousandth
of a Common Share or Right. Notwithstanding the first sentence of this
Subsection 2.3(e), any adjustment required by this Section 2.3 shall be made no
later than the Expiration Time.

- 26 -

     (f) In the event the Company
shall at any time after the Record Time and prior to the Expiration Time issue
any shares of capital stock (other than Common Shares), or rights, options or
warrants to subscribe for or purchase any such capital stock, or securities
convertible into or exchangeable for any such capital stock, in a transaction
referred to in Clause 2.3(b)(i) or (iv), if the Board of Directors acting in
good faith determines that the adjustments contemplated by Subsection 2.3(b) in
connection with such transaction will not appropriately protect the interests of
the Holders of Rights, the Board of Directors acting in good faith may determine
what other adjustments to the Exercise Price, number of Rights and/or securities
purchasable upon exercise of Rights would be appropriate and, notwithstanding
Subsection 2.3(b), such adjustments, rather than the adjustments contemplated by
Subsection 2.3(b), shall be made. The Company and the Rights Agent shall have
authority with the prior approval of the holders of the Common Shares or the
Holders of Rights to amend this Agreement in accordance with Section 5.5 hereof,
as appropriate to provide for such adjustments.

     (g) Unless the Company shall have
exercised its election as provided in Subsection 2.3(h), upon each adjustment of
an Exercise Price as a result of the calculations made in Subsections 2.3(c),
(d) and (f), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of Common Shares, as the case may be (calculated to
the nearest one ten-thousandth), obtained by:

	 	(i) 	
      multiplying:

	 	 	 	 
	 		(A) 	
      the number of such Common Shares which would have been
      issuable upon the exercise of a Right immediately prior to this
      adjustment; by

	 	 	 	 
	 		(B) 	
      the relevant Exercise Price in effect immediately prior
      to such adjustment of the relevant Exercise Price; and

	 	 	 	 
	 	(ii) 	
      dividing the product so obtained by the relevant Exercise
      Price in effect immediately after such adjustment of the relevant Exercise
      Price.

     (h) The Company may elect on or
after the date of any adjustment of an Exercise Price to adjust the number of
Rights, in lieu of any adjustment in the number of Common Shares purchasable
upon the exercise of a Right. Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of Common
Shares for which such a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the relevant Exercise Price in effect
immediately prior to adjustment of the relevant Exercise Price by the relevant
Exercise Price in effect immediately after adjustment of the relevant Exercise
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the relevant Exercise Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this Subsection 2.3(h), the
Company shall, as promptly as is practicable, cause to be distributed to holders
of record of Rights Certificates on such record date, Rights Certificates
evidencing, subject to Section 5.6, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Rights Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein and may
bear, at the option of the Company, the relevant adjusted Exercise Price and
shall be registered in the names of holders of record of Rights Certificates on
the record date specified in the public announcement.

- 27 -

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

     (j) If as a result of an
adjustment made pursuant to this Section 2.3 or Section 3.1, the holder of any
Right thereafter exercised shall become entitled to receive any shares other
than Common Shares, thereafter the number of such other shares so receivable
upon exercise of any Right and the applicable Exercise Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as is practicable to the provisions with respect to the Common Shares
contained in this Section 2.3, and the provisions of this Agreement with respect
to the Common Shares shall apply on like terms to any such other shares.

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

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

     (m) Notwithstanding anything in
this Section 2.3 to the contrary, the Company shall be entitled to make such
reductions in each Exercise Price, in addition to those adjustments expressly
required by this Section 2.3, as and to the extent that in its good faith
judgment the Board of Directors shall determine to be advisable in order that
any: (i) consolidation or subdivision of Common Shares; (ii) issuance wholly for
cash of any Common Share or Convertible Securities; (iii) stock dividends; or
(iv) issuance of rights, options or warrants referred to in this Section 2.3, hereafter made by the Company
to holders of its Common Shares, shall not be taxable to such shareholders.

- 28 -

     (n) The Company covenants and
agrees that, after the Separation Time, it will not, except as permitted by
Sections 5.1, 5.2 and 5.5, take (or permit any Subsidiary of the Company to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

     (o) Whenever an adjustment to the
Exercise Price or a change in the securities purchasable upon exercise of the
Rights is made at any time after the Separation Time pursuant to this Section
2.3, the Company shall promptly and in any event, where such change or
adjustment occurs prior to the Separation Time, not later than the Separation
Time:

	 	(i) 	
      file with the Rights Agent and with the transfer agent
      for the Common Shares a certificate specifying the particulars of such
      adjustment or change; and

	 	 	 
	 	(ii) 	
      give, or cause the Rights Agent to give, notice of the
      particulars of such adjustment or change to Holders of the Rights who
      request a copy;

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

2.4 Date on Which Exercise is
Effective

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

2.5 Execution, Authentication, Delivery
and Dating of Right Certificates

     (a) The Rights Certificates shall
be executed on behalf of the Company by any two of its Chairman, its President
and Chief Executive Officer, a Vice-President or any director, provided that at
the time of such execution none of such officer or director, any Affiliate or
Associate of such officer or director or any person with whom such officer or
director or any such Affiliate or Associate is acting jointly or in concert has
commenced or publicly announced an intention to commence a Take-over Bid. The
signature of any of these officers on the Rights Certificates may be manual or
facsimile. Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the countersignature and delivery of
such Rights Certificates.

- 29 -

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

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

2.6 Registration, Registration of
Transfer and Exchange 

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

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

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

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

     (d) The Company shall not be
required to register the transfer or exchange of any Rights after the Rights
have been terminated pursuant to the provisions of this Agreement.

- 30 -

2.7 Mutilated, Destroyed, Lost and
Stolen Rights Certificates

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

     (b) If there shall be delivered
to the Company and the Rights Agent prior to the Expiration Time (i) evidence to
their reasonable satisfaction of the destruction, loss or theft of any Rights
Certificate and (ii) such security or indemnity as may be required by each of
them in their sole discretion to save each of them and any of their agents
harmless, then, in the absence of notice to the Company or the Rights Agent that
such Rights Certificate has been acquired by a bona fide purchaser, the Company
shall execute and upon its request the Rights Agent shall countersign and
deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new
Rights Certificate evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.

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

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

2.8 Persons Deemed Owners

     Prior to due presentment of a
Rights Certificate (or, prior to the Separation Time, the associated Common
Share certificate) for registration of transfer, the Company, the Rights Agent
and any agent of the Company or the Rights Agent may deem and treat the Person
in whose name a Rights Certificate (or, prior to the Separation Time, the
associated Common Share certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby for all purposes whatsoever and the Company
and the Rights Agent shall 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.

2.9 Delivery and Cancellation of
Certificates

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

- 31 -

2.10 Agreement of Rights Holders

     Every Holder of Rights, by
accepting such Rights, becomes a party to this Agreement and for greater
certainty is bound by the provisions herein and consents and agrees with the
Company and the Rights Agent and with every other Holder of Rights that:

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

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

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

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

	 	 	 
	 	(e) 	
      such holder is not entitled and has waived his right to
      receive any fractional Rights or any fractional Common Shares upon
      exercise of a Right (except as provided herein);

	 	 	 
	 	(f) 	
      subject to the provisions of Section 5.5, without the
      approval of any Holder of Rights and upon the sole authority of the Board
      of Directors acting in good faith, this Agreement may be supplemented or
      amended from time to time pursuant to and as provided herein;
and

	 	 	 
	 	(g) 	
      notwithstanding anything in this Agreement to the
      contrary, neither the Company nor the Rights Agent shall have any
      liability to any Holder of a Right or any other Person as a result of its
      inability to perform any of its obligations under this Agreement by reason
      of a preliminary or permanent injunction or other order, decree or ruling
      issued by a court of competent jurisdiction or by a governmental,
      regulatory or administrative agency or commission, or any statute, rule,
      regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such
obligation.

- 32 -

2.11 Rights Certificate Holder not Deemed a
Shareholder

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

ARTICLE 3

ADJUSTMENTS TO THE RIGHTS ON FLIP-IN EVENT

3.1 Flip-in Event 

     (a) Subject to the provisions of
Section 2.2, Subsection 3.1(b) and Section 5.2, in the event that prior to the
Expiration Time a Flip-in Event shall occur, each Right shall constitute,
effective from and after the later of its date of issue and at the close of
business on the tenth Trading Day after the Stock Acquisition Date, the right to
purchase from the Company, upon exercise thereof in accordance with the terms
hereof, that number of Common Shares having an aggregate Market Price on the
date of consummation or occurrence of such Flip-in Event equal to twice the
Exercise Price for an amount in cash equal to the Exercise Price (such right to
be appropriately adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3, without duplication, in the event that after such
date of consummation or occurrence, an event of a type analogous to any of the
events described in Section 2.3 shall have occurred with respect to such Common
Shares).

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

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

	 	 	 
	 	(ii) 	
      a transferee or other successor in title, direct or
      indirect, of Rights held by an Acquiring Person (or any Affiliate or
      Associate of an Acquiring Person or any Person acting jointly or in
      concert with an Acquiring Person or an Affiliate or Associate of an Acquiring Person), whether or not
for consideration, in a transfer that the Board of Directors acting in good
faith has determined is part of a plan, arrangement, understanding or scheme of
an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any
Person acting jointly or in concert with an Acquiring Person or an Affiliate or
Associate of an Acquiring Person), that has the purpose or effect of avoiding
Clause 3.1(b)(i);

- 33 -

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

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

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

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

provided, however, that the Rights Agent shall not be under any
responsibility to ascertain the existence of facts that would require the
imposition of such legend but shall impose such legend only if instructed to do
so by the Company in writing or if a Holder fails to certify upon transfer or
exchange in the space provided on the Rights Certificate that such Holder is not
a Person described in such legend. The issuance of a Rights Certificate without
the legend referred to in this Subsection 3.1(d) shall be of no effect on the
provisions of Subsection 3.1(b).

- 34 -

3.2 Exchange Option 

     (a) The Board of Directors may,
at its sole option and without seeking the approval of holders of Voting Shares
or Rights but with the prior written consent of the Exchange if the Common
Shares are then listed on such exchange, at any time after a Flip-in Event has
occurred, authorize the Company to issue or deliver in respect of each Right
which is not void pursuant to Subsection 3.1(b), either: (i) in return for the
applicable Exercise Price and the Right, debt, equity or other securities or
assets (or a combination thereof) having a value equal to twice the applicable
Exercise Price; or (ii) in return for the Right, subject to any amounts that may
be required to be paid under applicable law, debt, equity or other securities or
assets (or a combination thereof) having a value equal to the value of the
Right, in full and final settlement of all rights attaching to the Rights, where
in either case the value of such debt, equity or other securities or other
assets (or a combination thereof) and, in the case of Clause 3.2(a)(ii), the
value of the Right, shall be determined by the Board of Directors which may rely
upon the advice of a nationally or internationally recognized firm of investment
dealers or investment bankers selected by the Board of Directors.

     (b) If the Board of Directors
authorizes the exchange of debt or equity securities or assets (or a combination
thereof) for Rights pursuant to Subsection 3.2(a), without any further action or
notice, the right to exercise the Rights will terminate and the only right
thereafter of a holder of Rights shall be to receive the debt or equity
securities or assets (or a combination thereof) in accordance with the exchange
formula authorized by the Board of Directors. Within 10 Business Days after the
Board of Directors has authorized the exchange of debt or equity securities or
assets (or a combination thereof) for Rights pursuant to Subsection 3.2(a), the
Company shall give notice of exchange to the holders of such Rights by mailing
such notice to all such holders at their last addresses as they appear upon the
register of Rights holders maintained by the Rights Agent. Each such notice of
exchange will state the method by which the exchange of debt or equity
securities or assets (or a combination thereof) for Rights will be effected.

ARTICLE 4

THE RIGHTS AGENT

4.1 General

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

- 35 -

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

     (c) The Company will inform the
Rights Agent in a reasonably timely manner of events which may materially affect
the administration of this Agreement by the Rights Agent, and at any time, upon
request, shall provide to the Rights Agent an incumbency certificate with
respect to the then current directors and officers of the Company, provided that
failure to inform the Rights Agent of any such events, or any defect therein,
shall not affect the validity of any action taken hereunder in relation to such
events.

4.2 Merger or Amalgamation or Change of
Name of Rights Agent 

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

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

- 36 -

4.3 Duties of Rights Agent

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

	 	(a) 	
      The Rights Agent may retain and consult with legal
      counsel (who may be legal counsel for the Company) and the opinion of such
      counsel will be full and complete authorization and protection to the
      Rights Agent as to any action taken or omitted by it in good faith and in
      accordance with such opinion; the Rights Agent may also, with the approval
      of the Company (where such approval may reasonably be obtained and such
      approval not be unreasonably withheld), retain and consult with such other
      experts or advisors as the Rights Agent shall consider necessary or
      appropriate to properly carry out the duties and obligations imposed under
      this Agreement (at the Company's expense) and the Rights Agent shall be
      entitled to act and rely in good faith on the advice of any such expert or
      advisor.

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

	 	 	 
	 	(c) 	
      Notwithstanding anything to the contrary, the Rights
      Agent will be liable hereunder only for its own gross negligence, bad
      faith or wilful misconduct.

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

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

- 37 -

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

	 	 	 
	 	(g) 	
      The Rights Agent is hereby authorized and directed to
      accept instructions with respect to the performance of its duties
      hereunder from any person believed by the Rights Agent to be the Chairman,
      the President and Chief Executive Officer, a Vice-President or a director
      of the Company, and to apply to such persons for advice or instructions in
      connection with its duties, and it shall not be liable for any action
      taken or suffered by it in good faith in accordance with instructions of
      any such person. All such instruction shall, except where circumstances
      make it impracticable or the Rights Agent otherwise agrees, be given in
      writing and, where not in writing, such instructions will be confirmed in
      writing as soon as is reasonably practicable after the giving of such
      instructions.

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

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

- 38 -

4.4 Change of Rights Agent

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

4.5 Compliance with Money Laundering
Legislation

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

- 39 -

4.6 Privacy Provision

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

ARTICLE 5

MISCELLANEOUS

5.1 Redemption of Rights 

     (a) Redemption of Holders of
Voting Shares

     Until the occurrence of a Flip-in
Event as to which the application of Section 3.1 has not been waived pursuant to
Section 5.2 and provided that the provisions of Subsection 5.2(c) are not
applicable to such Flip-in Event, the Board of Directors may elect to redeem all
but not less than all of the then outstanding Rights at a redemption price of
$0.00001 per Right, appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 if an event of a type
analogous to any of the events described in Section 2.3 shall have occurred
(such redemption price being herein referred to as the "Redemption
Price").

     (b) Deemed
Redemption

     The Board of Directors shall,
without further formality, be deemed to have elected to redeem the Rights at the
Redemption Price on the date that a Person who has made a Permitted Bid, a
Competing Permitted Bid or a Take-over Bid in respect of which the Board of
Directors has waived the application of Section 3.1 takes up and pays for Voting
Shares pursuant to the terms and conditions of such Permitted Bid, Competing
Permitted Bid or Take-over Bid, as the case may be.

     (c) Redemption on Withdrawal
or Termination of Bid

     Where a Take-over Bid that is not
a Permitted Bid or Competing Permitted Bid expires, is withdrawn or otherwise
terminated after the Separation Time has occurred and prior to the occurrence of
a Flip-in Event, the Board of Directors may elect to redeem all the outstanding
Rights at the Redemption Price.

- 40 -

     (d) Effect of
Redemption

     If the Board of Directors elects
or is deemed to have elected to redeem the Rights, (i) the right to exercise the
Rights will thereupon, without further action and without notice, terminate and
the only right thereafter of the holders of Rights shall be to receive the
Redemption Price; and (ii) subject to Subsection 5.1(f) no further Rights shall
be issued.

     (e) Notice of
Redemption

     Within ten Business Days after
the Board of Directors electing or having been deemed to have elected to redeem
the Rights, the Company shall give notice of redemption to the Holders of the
then outstanding Rights by mailing such notice to all such Holders at their last
address as they appear upon the Rights Register or, prior to the Separation
Time, on the share register maintained by the Company’s transfer agent or
transfer agents for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the Holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made and will state that no payment will
be made to holders entitled to less than $10.00 in accordance with Subsection
5.1(g). The Company may not redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section
5.1, except in connection with the purchase of Common Shares prior to the
Separation Time.

     (f) Reissuance of
Rights

     Upon the Rights being redeemed
pursuant to this Section 5.1, Rights may be reissued under this Agreement to
holders of record of Common Shares immediately following such redemption, and
thereafter, all the provisions of this Agreement shall continue to apply as if
the Separation Time had not occurred and Rights Certificates representing the
number of Rights held by each holder of record of Common Shares as of the
Separation Time had not been mailed to each such holder and for all purposes of
this Agreement, the Separation Time shall be deemed not to have occurred and
such reissued Rights shall, without any further formality, be attached to the
outstanding Common Shares in the same manner as prior to the occurrence of such
Separation Time.

     (g) Redemption Price of Under
$10

     The Company shall not be
obligated to make a payment of the Redemption Price to any holder of Rights
unless such holder is entitled to receive at least $10.00 in respect of all of
the Rights held by such holder.
5.2 Waiver of Flip-In
Event

     (a) Subject to the provisions of
Subsection 5.2(d), the Board of Directors may, at any time prior to the
occurrence of a Flip-in Event as to which the application of Section 3.1 has not
been waived pursuant to this Section 5.2, waive the application of Section 3.1
to such Flip-in Event by written notice delivered to the Rights Agent.

- 41 -

     (b) Notwithstanding and without
limiting the generality of Subsection 5.2(a), the Board of Directors may waive
the application of Section 3.1 to a Flip-in Event provided that the following
conditions are satisfied:

	 	(i) 	
      the Board of Directors has determined that the Acquiring
      Person became an Acquiring Person by inadvertence and without any
      intention to become, or knowledge that it would become, an Acquiring
      Person; and

	 	 	 
	 	(ii) 	
      such Acquiring Person has reduced its Beneficial
      Ownership of Voting Shares such that at the time of the granting of the
      waiver pursuant to this Subsection 5.2(b), it is no longer an Acquiring
      Person;

and, in the event of any such waiver, for the purposes of this
Agreement, such Flip-in Event shall be deemed not to have occurred and the
Separation Time shall be deemed not to have occurred as a result of such Person
having inadvertently become an Acquiring Person. Written notice of any such
waiver shall be given to the Rights Agent as soon as is reasonably practicable.

     (c) Until the occurrence of a
Flip-in Event as to which the application of Section 3.1 has not been waived
pursuant to this Section 5.2, upon written notice to the Rights Agent, the Board
of Directors may, with the prior consent of the holders of Voting Shares given
in accordance with Subsection 5.2(e), determine, if such Flip-in Event would
occur by reason of an acquisition of Voting Shares otherwise than pursuant to a
Take-over Bid made by means of a take-over bid circular to all holders of record
of Voting Shares and otherwise than in the circumstances set forth in Subsection
5.2(b), to waive the application of Section 3.1, to such Flip-in Event. In the
event that the Board of Directors proposes such a waiver, the Board of Directors
shall extend the Separation Time to a date subsequent to and not more than ten
Business Days following the meeting of shareholders called to approve such
waiver.

     (d) Until the occurrence of a
Flip-in Event as to which the application of Section 3.1 has not been waived
pursuant to this Section 5.2, upon written notice delivered to the Rights Agent,
the Board of Directors may determine to waive the application of Section 3.1 to
any Flip-in Event provided that the Flip-in Event would occur by reason of a
Take-over Bid made by take-over bid circular sent to all holders of Voting
Shares and provided further that if the Board of Directors waives the
application of Section 3.1 to such Flip-in Event, the Board of Directors shall
be deemed to have waived the application of Section 3.1 to any other Flip-in
Event occurring by reason of any Take-over Bid made by take-over bid circular to
all holders of Voting Shares which is made prior to the expiry of any Take-over
Bid (as the same may be extended from time to time) made by take-over bid
circular in respect of which a waiver is, or is deemed to have been, granted
under this Subsection 5.2(d).

     (e) If a waiver of a Flip-in
Event pursuant to Subsection 5.2(c) is proposed at any time prior to the
Separation Time, such redemption or waiver shall be submitted for approval to
the holders of Voting Shares. Such approval shall be deemed to have been given
if the redemption or waiver is approved by the affirmative vote of a majority of
the votes cast by Independent Shareholders represented in person or by proxy at
a meeting of such holders duly held in accordance with applicable laws and the
Company's articles.

- 42 -

5.3 Expiration

     No Person shall have any rights
whatsoever pursuant to or arising out of this Agreement or in respect of any
Right after the Expiration Time, except the Rights Agent as specified in
Subsection 4.1(a) hereof.

5.4 Issuance of New Rights
Certificates

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

5.5 Supplements and Amendments

     (a) The Company may from time to
time supplement or amend this Agreement without the approval of any Holders of
Rights or Voting Shares in order to correct any clerical or typographical error
or which are required to maintain the validity or effectiveness of this
Agreement as a result of any change in any applicable legislation, rules or
regulations thereunder. The Board of Directors acting in good faith may by
resolution, at or prior to the shareholders' meeting referred to in Section
5.15, or any adjournment or postponement thereof, supplement or amend this
Agreement without the approval of any Holders of Rights or Voting Shares in
order to make any changes which the Board of Directors may deem necessary or
desirable (whether or not such action would materially adversely affect the
interest of the holders of Rights generally). Notwithstanding anything in this
Section 5.5 to the contrary, no such supplement or amendment shall be made to
the provisions of Article 4 except with the written concurrence of the Rights
Agent to such supplement or amendment.

     (b) Without limiting the
generality of Subsection 5.5(a), the Company may, with the prior consent of the
holders of Common Shares obtained as set forth below, at any time prior to the
Separation Time, amend, vary or delete any of the provisions of this Agreement
and the Rights (whether or not such action would materially adversely affect the
interests of the Holders of Rights generally), provided that no such amendment,
variation or deletion shall be made to the provisions of Article 4 except with
the written concurrence of the Rights Agent to such amendment, variation or
deletion. Such consent shall be deemed to have been given if such amendment,
variation or deletion is authorized by the affirmative vote of a majority of the
votes cast by Independent Shareholders present or represented at and entitled to
be voted at a meeting of the holders of Common Shares duly called and held in
compliance with applicable laws and the memorandum and articles of the
Company.

     (c) Without limiting the
generality of Subsection 5.5(a), the Company may, with the prior consent of the
Holders of Rights, at any time on or after the Separation Time, amend, vary or
delete any of the provisions of this Agreement and the Rights (whether or not
such action would materially adversely affect the interests of the Holders of
Rights generally), provided that no such amendment, variation or deletion shall
be made to the provisions of Article 4 except with the written concurrence of
the Rights Agent thereto. Such consent shall be deemed to have been given if such amendment, variation or deletion is
authorized by the affirmative vote of a majority of the votes cast by the
Holders of Rights (other than Rights which are void pursuant to the provisions
hereof) present or represented at and entitled to vote at a meeting of the
Holder of Rights. For the purposes, hereof, the procedures for the calling,
holding and conduct of the meeting shall be those, as nearly as may be, which
are provided in the Company's memorandum and articles and the Business
Corporations Act with respect to meetings of shareholders of the Company and
each Right shall be entitled to one vote at any such meeting.

- 43 -

     (d) Any amendments made by the
Company to this Agreement pursuant to Subsection 5.5(a) which are required to
maintain the validity of this Agreement as a result of any change in any
applicable legislation or regulation thereunder shall:

	 	(i) 	
      if made before the Separation Time, be submitted to the
      holders of the Common Shares at the next meeting of such holders and the
      holders of the Common Shares may, by the majority referred to in
      Subsection 5.5(b), confirm or reject such amendment;

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

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

     (e) The Company shall give notice
in writing to the Rights Agent of any supplement, amendment, deletion, variation
or rescission to this Agreement pursuant to this Section 5.5 within five
Business Days of the date of any such supplement, amendment, deletion, variation
or rescission, provided that failure to give such notice, or any defect therein,
shall not affect the validity of any such supplement, amendment, deletion,
variation or rescission.

     (f) Any amendment to this
Agreement shall be subject to the receipt of any requisite approvals or consent
from any applicable regulatory authority including, without limitation, any
necessary approvals of the Exchange.

- 44 -

5.6 Fractional Rights and Fractional
Shares

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

     (b) Share Certificates for Common
Shares shall only be issued upon written request to the Company and the Company
shall not be required in any circumstances to issue fractional Common Shares
upon exercise of the Rights or to distribute certificates which evidence
fractional Common Shares. In lieu of issuing fractional Common Shares, the
Company shall pay to the registered Holders of Rights Certificates at the time
such Rights are exercised as herein provided, an amount in cash equal to the
same fraction of the Market Price of one Common Share.

     (c) The Rights Agent shall have
no obligation to make any payments in lieu of issuing fractions of Rights or
Common Shares pursuant to Subsections 5.6(a) or (b), respectively, unless and
until the Company shall have provided to the Rights Agent the amount of cash to
be paid in lieu of issuing such fractional Rights or Common Shares, as the case
may be.

5.7 Rights of Action

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

5.8 Notice of Proposed Actions

     If after the Separation Time and
prior to the Expiration Time:

	 	(a) 	
      the Company shall propose to effect the liquidation,
      dissolution or winding up of the Company or the sale of all or
      substantially all of the Company's assets;

	 	 	 
	 	(b) 	
      there shall occur an adjustment in the rights attaching
      to the Rights pursuant to Section 3.1 as a result of the occurrence of a
      Flip-in Event,

- 45 -

	 	(c) 	
      the Company shall propose to effect or permit (in cases
      where the Company’s permission is required) any Flip-in
  Event,

then, in each such case, the Company shall give to each Holder
of a Right, in accordance with Section 5.9 hereof, a notice of such proposed
action or event, which shall specify the date on which such change to the
Rights, Flip-in Event, liquidation, dissolution, winding up or sale is to take
place, and such notice shall be so given at least 20 Business Days prior to the
date of taking of such proposed action.

5.9 Notices

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

Pacific Rim Mining Corp.
Suite 1050
– 625 Howe Street
Vancouver, British Columbia
V6C 2T6

Attention: President and Chief
Executive Officer 
Facsimile: (604) 689-1978

Any notice or demand authorized or required by this Agreement
to be given or made by the Company or by a Holder of Rights to or on the Rights
Agent shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company), or sent by facsimile or other form of recorded electronic
communication, charges prepaid and confirmed in writing, as follows:

Computershare Investor Services
Inc.
2nd Floor -510 Burrard Street
Vancouver, British Columbia
V6C
3B9

Attention: Senior Manager, Client
Services
Facsimile: (604) 661-9401

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

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

- 46 -

5.10 Costs of Enforcement

     The Company agrees that if the
Company or any other Person the securities of which are purchasable upon
exercise of Rights fails to fulfil any of its obligations pursuant to this
Agreement, then the Company or such Person will reimburse the Holder of any
Rights for the costs and expenses (including reasonable legal fees) incurred by
such Holder in actions to enforce his rights pursuant to any Rights or this
Agreement.

5.11 Benefits of this Agreement

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

5.12 Governing Law

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

5.13 Language

     Les parties aux présentes ont
exigées que la présente convention ainsi que tous les documents et avis qui s'y
rattachent et/ou qui en découleront soient rédigés en langue anglaise. The
parties hereto have required that this Agreement and all documents and notices
related thereto and/or resulting therefrom be drawn up in the English
language.

5.14 Severability

     If any Section, Subsection,
Clause, Subclause, term or provision hereof or the application thereof to any
circumstance or any right hereunder shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such Section, Subsection, Clause,
Subclause, term or provision or such right shall be ineffective only as to such
jurisdiction and to the extent of such invalidity or unenforceability in such
jurisdiction without invalidating or rendering unenforceable or ineffective the
remaining Sections, Subsections, Clauses, Subclauses, terms and provisions
hereof or rights hereunder in such jurisdiction or the application of such
Section, Subsection, Clause, Subclause, term or provision or rights hereunder in
any other jurisdiction or to circumstances other than those as to which it is
specifically held invalid or unenforceable.

- 47 -

5.15 Effective Date

     This Agreement is in full force
and effect in accordance with its terms from immediately after the close of the
annual general meeting of shareholders of the Company held on September 6,
2012.

5.16 Reconfirmation

     This Agreement must be
reconfirmed by a resolution passed by a majority of the votes cast by the
Independent Shareholders present or represented by proxy at the annual meeting
of shareholders of the Company held in 2015 and at every third annual meeting of
shareholders of the Company thereafter at which this Agreement has been
reconfirmed pursuant to this Section 5.16. If this Agreement is not so
reconfirmed or is not presented for reconfirmation at any such annual meeting,
this Agreement and all outstanding Rights shall terminate and be void and of no
further force and effect on and from the date of termination of any such annual
meeting; provided, however, that termination shall not occur if a Flip-in Event
has occurred (other than a Flip-in Event which has been waived pursuant to the
terms hereof), prior to the date upon which this Agreement would otherwise
terminate pursuant to this Section 5.16.

5.17 Determinations and Actions by the Board of
Directors

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

5.18 Rights of Board of Directors and the
Company

     Without limiting the generality
of the foregoing, nothing contained herein shall be construed to suggest or
imply that the Board of Directors shall not be entitled to recommend that
holders of Voting Shares reject or accept any Take-over Bid or take any other
action (including, without limitation, the commencement, prosecution, defence or
settlement of any litigation and the submission of additional or alternative
Take-over Bids or other proposals to the holders of the Voting Shares with
respect to any Take-over Bid or otherwise that the Board of Directors believes
is necessary or appropriate in the exercise of its fiduciary duties.

5.19 Regulatory Approvals

     Any obligation of the Company or
action or event contemplated by this Agreement shall be subject to the receipt
of any requisite approval or consent from any governmental or regulatory
authority, including any necessary approvals of any stock exchange. Any
amendment or supplement to this Agreement is subject to the approval of any
stock exchange on which the Common Shares are listed.

- 48 -

5.20 Declaration as to Non-Canadian
Holders

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

5.21 Time of the Essence

     Time shall be of the essence in
this Agreement.

5.22 Successors

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

5.23 Execution in Counterparts

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

- 49 -

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

	 	 	PACIFIC RIM MINING CORP.
      
 	  
	 	By: 		  
	 	 	President and Chief Executive
      Officer  
	 	 	  	  
	 	By: 		  
	 	 	Corporate Secretary 	  
	 	 	  	  
	 	 	  	  
	 	 	COMPUTERSHARE INVESTOR 	  
	 	 	SERVICES INC.

 	  
	 	By: 		  
	 	 	Authorized Signatory 	  
	 	 	  	  
	 	By: 		c/s 
	 	 	Authorized Signatory 	  

Exhibit A

PACIFIC RIM MINING CORP.

AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN AGREEMENT

[FORM OF RIGHTS CERTIFICATE]

	Certificate No. __________	__________ Rights 

THE RIGHTS ARE SUBJECT TO REDEMPTION,
AT THE OPTION OF THE CORPORATION, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF THE
RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, OR
TRANSFEREES OF AN ACQUIRING PERSON OR ITS ASSOCIATES OR AFFILIATES (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY PERSON ACTING JOINTLY OR IN
CONCERT WITH ANY OF THEM, MAY BECOME VOID WITHOUT ANY FURTHER ACTION.

Rights Certificate

     This certifies that
____________________, or registered assigns, is the registered holder of the
number of Rights set forth above, each of which entitles the registered holder
thereof, subject to the terms, provisions and conditions of the Shareholder
Rights Plan Agreement dated as of the 6th day of September, 2012 (the
"Rights Agreement") between Pacific Rim Mining Corp., a corporation
subsisting under the Business Corporations Act (British Columbia) (the
"Corporation") and Computershare Investor Services Inc., a company
existing under the laws of Canada, as rights agent (the "Rights Agent",
which term shall include any successor Rights Agent under the Rights Agreement)
to purchase from the Company at any time after the Separation Time (as such term
is defined in the Rights Agreement) and prior to the Expiration Time (as such
term is defined in the Rights Agreement), one fully paid and non-assessable
Common Share of the Company (a "Common Share") at the Exercise Price
referred to below, upon presentation and surrender of this Rights Certificate
together with the Form of Election to Exercise duly executed and submitted to
the Rights Agent at its principal office in the city of Vancouver. The Exercise
Price shall initially be $100 (Canadian) per Right and shall be subject to
adjustment in certain events as provided in the Rights Agreement.

     In certain circumstances
described in the Rights Agreement, the number of Common Shares which each Right
entitles the registered holder thereof to purchase shall be adjusted as provided
in the Rights Agreement.

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

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

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

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

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

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

     WITNESS the facsimile signature
of the proper officers of the Company.

Date: ____________________

	PACIFIC RIM MINING CORP. 
 	  
	By: ______________________________________	By:
______________________________________
	
Countersigned: 
 	  
	COMPUTERSHARE INVESTOR SERVICES INC.
    
 
	By: ______________________________________	  
	                               Authorized
      Signature 	  

(To be attached to each Rights Certificate)
FORM OF
ELECTION TO EXERCISE

	TO: 	PACIFIC RIM MINING CORP. 
	 	 
	AND TO: 	COMPUTERSHARE TRUST COMPANY OF CANADA
  

     The undersigned hereby
irrevocably elects to exercise _______________ whole Rights represented by the
attached Rights Certificate to purchase the Common Shares issuable upon the
exercise of such Rights and requests that certificates for such Shares be issued
to:

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

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

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

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

     Signature must be guaranteed by a
Schedule 1 Canadian chartered bank or an eligible guarantor institution with
membership in an approved signature guarantee medallion program.

CERTIFICATE

(To be completed if true)

     The undersigned hereby
represents, for the benefit of all holders of Rights and Common Shares, that the
Rights evidenced by this Rights Certificate are not, and, to the knowledge of
the undersigned, have never been, Beneficially Owned by an Acquiring Person or
an Affiliate or Associate thereof or any Person acting jointly or in concert
with any of the foregoing (all capitalized terms are used as defined in the
Rights Agreement).

Signature: ______________________________

NOTICE

     In the event the certification
set forth in the Form of Election to Exercise is not completed, the Company will
deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to
be an Acquiring Person or an Affiliate or Associate thereof (all capitalized
terms are used as defined in the Rights Agreement) and accordingly such Rights
shall be null and void.

FORM OF ASSIGNMENT

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

	FOR VALUE RECEIVED 	 
	  	 
	hereby sells, assigns and transfers
      unto     	 
		(Please print name and address of
      transferee) 

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

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

     Signature must be guaranteed by a
Schedule 1 Canadian chartered bank or an eligible guarantor institution with
membership in an approved signature guarantee medallion program.

CERTIFICATE

(To be completed if true)

     The undersigned hereby
represents, for the benefit of all holders of Rights and Common Shares, that the
Rights evidenced by this Rights Certificate are not, and, to the knowledge of
the undersigned, have never been, Beneficially Owned by an Acquiring Person or
an Affiliate or Associate thereof or any Person acting jointly or in concert
with any of the foregoing (all capitalized terms are used as defined in the
Rights Agreement).

Signature: ______________________________

NOTICE

     In the event the certification
set forth in the Form of Assignment is not completed, the Company will deem the
Beneficial Owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (all capitalized terms are
used as defined in the Rights Agreement) and accordingly such Rights shall be
null and void.U.S Geothermal Inc.: Exhibit 10.1 - Filed by newsfilecorp.com

Exhibit 10.1

EMPLOYMENT AGREEMENT 

THIS AGREEMENT made as of the
1st day of July, 2013 

BETWEEN: 

US Geothermal Inc., a body
corporate having an office at 1505 
Tyrell Lane Boise, Idaho 83706 
(the
"Company") 

AND: 

Douglas J. Glaspey of 1940 Teal
Lane, Boise, Idaho 83706 
(the "Executive") 

WHEREAS: 

A.               
The Company is in the business of developing and operating geothermal power
generation facilities; 

B.                
The Executive is a senior executive with extensive Company and industry
experience and the Company wishes to engage Executive as its President and Chief
Operating Officer; 

C.                
The Company has determined that appropriate arrangements should be taken to
encourage the continued attention and dedication of the Executive to his
assigned duties without distraction; 

D.                
In Consideration of the Executive’s employment with the Company, the Company
desires to provide the Executive with certain compensation and benefits as set
forth in this Agreement in order to ameliorate the financial and career impact
on the Executive in the event the Executive’s employment with the Company is
terminated for a reason related to a Change in Control of the Company; 

E.                
The Company and the Executive (the “Parties”) wish to enter into
this written Employment Agreement (“Agreement”). 

NOW THEREFORE in consideration of the respective
covenants and agreements herein, the Parties covenant and agree as follows: 

- 2 - 

	1. 	
      Employment

	1.1                
Position and Duties

The Company agrees to employ the Executive and the Executive
hereby accepts employment with the Company as its President and Chief
Operating Officer during the Term (as defined in paragraph 1.2 below)
subject to the general supervision, advice and direction of the Company’s Chief
Executive Officer (“CEO”) and the Company’s Board of Directors
(“Board”), and subject to the terms and conditions of this Agreement. The
Executive’s authority, duties and responsibilities shall be consistent with such
authority, duties and responsibilities as are customary for his position.
Executive shall also perform such other services and duties as the CEO or Board
may from time-to-time lawfully assign or communicate to the Executive on behalf
of the Company by the Board. Executive will comply with all rules, policies and
procedures of Company as modified from time to time, including without
limitation, rules and procedures set forth in the Company’s employee handbook,
supervisor’s manuals and operating manuals. Executive will perform all of
Executive’s responsibilities in compliance with all applicable laws and will
ensure that the operations that Executive manages are in compliance with all
applicable laws.

	1.2                
Term

The initial term of employment pursuant to this Agreement shall
be from July 1, 2013 (the “Effective Date”) and this Agreement shall
remain in full force and effect until the earlier of June 30, 2015 or until
terminated as hereinafter provided. This Agreement will automatically renew at
the end of the initial term and at the end of each subsequent term, for an
additional one (1) year term unless either party gives written notice of
non-renewal to the other at least sixty (60) days prior to the expiration of the
then current term. The initial term of this Agreement and any subsequent one
year extensions(s) will be referred to as the “Term.” 

	1.3                
Service
	 	 
	1.3.1                
During the Term the Executive
shall:

	 	i. 	
      well and faithfully serve the Company and use his best
      efforts to promote the best interests of the Company;

	 	 	 
	 	ii. 	
      devote one hundred percent of his working time to his
      Employment hereunder, and while engaged in his employment will have the
      authority and duty to perform and carry out such duties and
      responsibilities as are customarily carried out by persons holding similar
      positions in other renewable energy companies comparable in size to the
      Company and such additional and related duties as
may from time to time be assigned, delegated, limited or
      determined by the CEO or Board;

- 3 - 

	 	iii. 	
      comply in all material respects with any Company policies
      that may apply to the Executive from time to time;

1.3.2                
During the term, and after Executive’s employment with the Company ends, the
Company shall defend and indemnify Executive in connection with legal claims,
lawsuits, causes of action, or liabilities asserted against him arising out of
or related to his employment with the Company to the maximum extent permitted by
law and the Company’s Certificate of Incorporation or Bylaws. The Company will
also provide the Executive with an advance for any expenses in connection with
such defense and/or indemnification to the maximum extent permitted by law and
the Company’s Certificate of Incorporation or Bylaws. 

	2. 	
      Other Business Activities

It is agreed that the Executive's employment hereunder shall
constitute one hundred percent of his working time which shall be devoted
exclusively for the benefit of the Company, and therefore, the Executive may not
engage in any other business activities that would interfere with, or impede,
the performance of his duties as President and Chief Operating Officer of the
Company.

	3. 	
      Compensation

In consideration of the performance by the Executive of his
responsibilities and duties as President and Chief Operating Officer hereunder:

	 	i. 	
      the Company will pay the Executive the sum of US
      $220,000 per annum, payable in monthly installments of $18,333 no
      later than the last working day of the month;

	 	 	 
	 	ii. 	
      the Company will grant the Executive cash or stock bonus
      and/or Stock Options in such amount and on such conditions as the Board of
      Directors of the Company may determine from time to time;

	 	 	 
	 	iii. 	
      the Company will provide the Executive and his immediate
      family (consisting of spouse and children) with medical, dental and
      related coverages as are available to the other employees of the
      Company;

	 	 	 
	 	iv. 	
      the Company will provide the Executive reasonable life
      insurance and accidental death coverage with the proceeds payable to the
      Executive’s estate or specified family member;
and

- 4 - 

	 	v. 	
      the Company will provide a 401K retirement benefit as is
      available to the other employees of the
Company.

	4. 	
      Expenses

The Company will reimburse the Executive for any and all
reasonable and documented expenses actually and necessarily incurred by the
Executive in connection with the performance of his duties under this Agreement.
The Executive will furnish the Company with an itemized account of his expenses
in such form or forms as may reasonably be required by the Company and at such
times or intervals as may be required by the Company, and reimbursement by the
Company will be made as soon as administratively practicable thereafter but in
no event later than the earlier of (i) three (3) months after the date of
termination and (ii) and no later than the end of the calendar year in which the
expense was incurred. 

	5. 	
      Vacation

The Executive will be entitled to a paid vacation of five weeks
within each 12 month period under the terms of this Agreement, to be calculated
from the date of commencement of employment set forth in Section 2 herein. This
vacation must be taken on dates which do not adversely compromise the
Executive’s performance of his duties under this Agreement. 

	6. 	
      Termination

This Agreement and the Executive's employment may be terminated
by the Company summarily and without notice, payment in lieu of notice,
severance payments, benefits, damages or any sums whatsoever, on the occurrence
of any one or more of the following events: 

	 	i. 	
      the Executive’s failure to carry out his duties hereunder
      in a competent and professional manner;

	 	 	 
	 	ii. 	
      the Executive’s appropriation of corporate opportunities
      for the Executive’s direct or indirect benefit or his failure to disclose
      any material conflict of interest;

	 	 	 
	 	iii. 	
      the Executive’s plea of guilty to, or conviction of, an
      indictable offence once all appeals (if any) have been completed without
      such conviction having been reversed;

	 	 	 
	 	iv. 	
      the existence of cause for termination of the Executive
      at common law including but not limited to cause related to fraud,
      dishonesty, illegality, breach of statute or regulation, or gross
      incompetence;

- 5 - 

	 	v. 	
      failure on the part of the Executive to disclose material
      facts concerning his business interests or employment outside of his
      employment by the Company, provided such facts relate to the Executive’s
      duties hereunder;

	 	 	 
	 	vi. 	
      refusal on the part of the Executive to follow the
      reasonable and lawful directions of the Company;

	 	 	 
	 	vii. 	
      breach of fiduciary duty to the Company on the part of
      the Executive; or

	 	 	 
	 	viii. 	
      material breach of this Agreement or gross negligence on
      the part of the Executive in carrying out his duties under this
      Agreement.

6.1                
In the event of the early termination of the Agreement for any reason
set out in Section 6 above, the Executive shall only be entitled to such
compensation as would otherwise be payable to the Executive hereunder up to and
including such date of termination, as the case may be.

6.2                
This Agreement and the Executive's employment may be terminated on
notice by the Company to the Executive for any reason other than for the reasons
set out in Section 6 above of this Agreement upon one month’s notice to the
Executive. In such event, the Executive will be entitled to payment of salary up
to and including such date of termination and the pro-rata monetary equivalent
of any unused vacation days accrued to the date of termination payable in
accordance with usual payroll practices but in no event later than two and
one-half (2 1⁄2) months following the date of termination and the Executive shall
not have any ability to influence the tax year in which payment is made.
Expenses incurred up to and including such date of termination shall be
reimbursed only in accordance with Section 4. 

6.3                
This Agreement and the Executive's employment may be terminated on
notice by the Executive to the Company for any reason upon sixty (60) days’
notice to the Company. In such event, the Executive will be entitled to payment
of salary up to and including such date of termination and the pro-rata monetary
equivalent of any unused vacation days accrued to the date of termination.
Expenses incurred up to and including such date of termination shall be
reimbursed only in accordance with Section 5. 

6.4                
In the event that (i) Executive’s employment is terminated either by Company
without Cause or by Executive for Good Reason (as defined below), and (ii) a
Change of Control (as defined below) has occurred within the twelve (12) month
period preceding the date of such termination, the Executive shall be entitled
to receive a lump sum payment in an amount equal to twenty-four (24) monthly
installments of the Executive’s base annual salary as set forth under Section
3(i). Any payments made under this Section 6.4, in all events, will be paid on
the 30th day following of the date of termination. For purposes of
this Section 6.4, the Executive shall be considered to have had a termination of
employment as of the date that the facts and circumstances indicate that it is
reasonably anticipated that the Executive will perform no further services for the Company and its affiliates after such date or
that the level of bona fide services for the Company and its affiliates that the
Executive is expected to perform is expected to decrease permanently to no more
than 20% of the average level of bona fide services that the Executive performed
over the immediately preceding 36-month period. Whether the Executive has had a
termination of employment will be determined in a manner consistent with the
definition of “separation from service” under Code section 409A. 

- 6 - 

6.5                
If this Agreement is terminated in accordance with Section 6.4 and if the
Executive elects continuation coverage under COBRA, the benefits provided to the
Executive pursuant to Section 3(iii) of this Agreement shall continue for the
number of months of compensation the Executive is entitled to following the
termination of employment pursuant to Section 6.4 or until the Executive
commences alternative employment, whichever occurs first, but in no event will
such coverage extend beyond the period which the Executive is eligible for COBRA
continuation coverage; provided that, if such continued participation is not
permissible under applicable law, Company or its successor shall provide
Executive with benefits substantially similar to those to which Executive would
have been entitled under those plans in which Executive’s continued
participation is not permissible. The percentage of the contributions by the
Company for the cost of the benefits provided pursuant to this Section 6.5 shall
be at the same level as the Company’s contribution for such benefits during the
Executive’s employment. 

	7. 	
      CONFIDENTIAL INFORMATION

7.1                
The Executive acknowledges that, by reason of the Executive's employment by
the Company, the Executive will have access to Confidential Information (as
defined herein )of the Company that the Company has spent time, effort and money
to develop and acquire. For the purposes of this Agreement any reference to the
“Company” shall mean the Company, and such respective affiliates and
subsidiaries as may exist from time to time. 

7.2                
The Executive acknowledges that the Confidential Information is a valuable
and unique asset of the Company and that the Confidential Information is and
will remain the exclusive property of the Company. 

7.3                
The Executive agrees to maintain securely and hold in strict confidence all
Confidential Information received, acquired or developed by the Executive or
disclosed to the Executive as a result of or in connection with the Executive's
employment with the Company. The Executive agrees that, both during his
employment with the Company and after the termination of his employment with the
Company, the Executive will not, directly or indirectly, divulge, communicate,
use, copy or disclose or permit others to use, copy or disclose, any
Confidential Information to any person, except as such disclosure or use is
required to perform his duties hereunder or as may be consented to by prior
written authorization of the Company. 

- 7 - 

7.4                
The obligation of confidentiality imposed by this Agreement shall not apply
to information that appears in issued patents or printed publications, that
otherwise becomes generally known in the industry through no act of the
Executive in breach of this Agreement, or that is required to be disclosed by
court order or applicable law. 

7.5                
The Executive understands that the Company has from time to time in its
possession information belonging to third parties or which is claimed by third
parties to be confidential or proprietary and which the Company has agreed to
keep confidential. The Executive agrees that all such information shall be
Confidential Information for the purposes of this Agreement. 

7.6                
The Executive agrees that documents, copies, records and other property or
materials made or received by the Executive that pertain to the business and
affairs of the Company, including all Confidential Information which is in the
Executive's possession or under the Executive's control are the property of the
Company and that the Executive will return same and any copies of same to the
Company immediately upon termination of the Executive's employment or at any
time upon the request of the Company. 

8.                
RESTRICTED ACTIVITIES 

	8.1                
Restriction on
Competition.

The Executive covenants and agrees with the Company that the
Executive will not, without the prior written consent of the Company, at any
time during his employment or for a period of twelve (12) months following the
termination of the Executive's employment, for any reason, either individually
or in partnership or in conjunction with any person, whether as principal,
agent, shareholder, director, officer, employee, investor, or in any other
manner whatsoever, directly or indirectly, advise, manage, carry on, be engaged
in, own or lend money to, or permit the Executive's name or any part thereof to
be used or employed by any person managing, carrying on or engaged in a
geothermal business anywhere in Oregon, Idaho, Nevada, or the Republic of
Guatemala or other jurisdiction in which the Company is carrying on active
business which is in Direct Competition with the business of the Company or its
subsidiaries.

	8.2                
Restriction on
Solicitation.

The Executive shall not, at any time during his employment or
for a period of twelve (12) months after the termination of the Executive's
employment, for any reason, without the prior written consent of the Company,
for his account or jointly with another, either directly or indirectly, for or
on behalf of himself or any individual, partnership, corporation or other legal
entity, as principal, agent, employee or otherwise, solicit, influence, entice
or induce, attempt to solicit, influence, entice or induce: 

	 	i. 	any person who is employed by the Company to
      leave such employment; or 

- 8 - 

	 	ii. 	
      any person, firm or corporation whatsoever, who is or was
      at any time in the last twelve (12) months of the Executive's employment a
      customer or supplier of the Company or any affiliate or subsidiary of the
      Company, to cease its relationship with the Company or any affiliate or
      subsidiary of the Company.

	9. 	
      Acknowledgement

The Executive acknowledges that damages would be an
insufficient remedy for a breach by him of this Agreement and agrees that the
Company may apply for and obtain any relief available to it in a court of law or
equity, including injunctive relief, to restrain breach or threat of breach of
this Agreement by the Executive or to enforce the covenants contained therein
and, in particular, the covenants contained in Sections 8 and 9, in addition to
rights the Company may have to damages arising from said breach or threat of
breach. 

	10. 	
      Representations and
Warranties

The Executive represents and warrants to the Company that the
execution and performance of this Agreement will not result in or constitute a
default, breach, or violation, or an event that, with notice or lapse of time or
both, would be a default, breach, or violation, of any understanding, agreement
or commitment, written or oral, express or implied, to which the Executive is
currently a party or by which the Executive or Executive's property is currently
bound. 

Executive represents and warrants to Company that Executive is
free to enter into this Agreement and has no contract, commitment, arrangement
or understanding to or with any party that restrains or is in conflict with
Executive’s performance of the covenants, services and duties provided for in
this Agreement. Executive agrees to indemnify Company and hold it harmless
against any and all liabilities or claims arising out of any unauthorized act or
acts by Executive that, the foregoing representation and warranty to the
contrary notwithstanding, are in violation, or constitute a breach, of any such
contract, commitment, arrangement or understanding. 

Executive acknowledges and agrees that Company has made no
representations or warranties with respect to the tax consequences of any of the
payments or other consideration provided by the Company to Executive under the
terms of this Agreement, and that Executive is solely responsible for
Executive’s compliance with any and all laws applicable to such payments or
other consideration. 

Company may take such action as it deems appropriate to insure
that all applicable federal, state, city and other payroll, withholding, income
or other taxes arising from any compensation, benefit or any other payments made
pursuant to this Agreement, or any other contract, agreement or understanding
that relates, in whole or in part, to Executive’s employment with Company, are
withheld or collected from Executive.

- 9 - 

	11. 	
      Governing Law

This Agreement shall be construed and enforced in accordance
with the laws of the State of Idaho, USA. 

	12. 	
      Entire Agreement

This Agreement constitutes the entire agreement between the
parties hereto with respect to the relationship between the Company and the
Executive and supersedes all prior arrangements and agreements, whether oral or
in writing between the parties hereto with respect to the subject matter hereof.

	13. 	
      Amendments

No amendment to or variation of the terms of this Agreement
will be effective or binding upon the parties hereto unless made in writing and
signed by both of the parties hereto. 

	14. 	
      Assignment

This Agreement is not assignable by the Executive. This
Agreement is assignable by the Company to any other company which controls, is
controlled by, or is under common control with the Company. This Agreement shall
enure to the benefit of and be binding upon the Company and its successors and
permitted assigns and the Executive and his heirs, executors and administrators.

	15. 	
      Severability

Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability and shall be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction. 

	16. 	
      Headings

The division of this Agreement into Sections and the insertion
of headings are for convenience or reference only and shall not affect the
construction or interpretation of this Agreement. 

	17. 	
      Time of Essence

Time shall be of the essence in all respects of this Agreement.

	18. 	
      Independent Legal
Advice

- 10 - 

The Executive agrees that he has had, or has had the
opportunity to obtain, independent legal advice in connection with the execution
of this Agreement and has read this Agreement in its entirety, understands its
contents and is signing this Agreement freely and voluntarily, without duress or
undue influence from any party. 

	19. 	
      Notice

Any notice required or permitted to be made or given under this
Agreement to either party shall be in writing and shall be sufficiently given if
delivered personally, by electronic transmission, or if sent by prepaid
registered mail to the intended recipient of such notice at their respective
addresses set forth below or to such other address as may, from time to time, be
designated by notice given in the manner provided in this Section: 

In the case of Company: 

US
Geothermal Inc. 
1505 Tyrell Lane 
Boise, Idaho 83706 
Attention:
Corporate Secretary 

Phone No.: (208) 424-1027 
Fax No.: (208)
424-1030 

In the case of Executive: 

Douglas J. Glaspey 
1940
Teal Lane 
Boise, Idaho 83706 
Telephone No.: 208 841 5573

Any notice delivered to the party to whom it is addressed shall
be deemed to have been given and received on the day it is so delivered or, if
such day is not a business day, then on the next business day following any such
day. Any notice mailed shall be deemed to have been given and received on the
10th business day following the date of mailing. In the case of facsimile
transmission, notice is deemed to have been given or served on the party to whom
it was sent at the time of dispatch if, following transmission, the sender
receives a transmission confirmation report or, if the sender’s facsimile
machine is not equipped to issue a transmission confirmation report, the
recipient confirms in writing that the notice has been received. 

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

- 11 - 

US GEOTHERMAL INC. 

By: /s/ Dennis J. Gilles   

 

SIGNED by the Executive in the presence of: 

	/s/ Kerry D.
      Hawkley                
       	/s/ Douglas J.
      Glaspey          
	Witness 	Douglas J. Glaspey 

Kerry D. Hawkley__________
Printed Name of Witness

 

 

- 12 - 

SCHEDULE “A” 

DEFINITIONS 

The following terms shall have the following definitions: 

(a) “Board” means the Board of Directors of the Company;

(b) “Cause” has the meaning commonly ascribed to the
phrase “cause” or “just cause for termination” at common law and, without
limiting the foregoing, includes any of the following acts or omissions by
Executive: 

	 	i. 	
      willful misconduct in the performance of Executive’s
      duties which is materially injurious to Company;

	 	 	 
	 	ii. 	
      refusal, without proper reason, to perform his duties
      after being provided notice within sixty days of any alleged refusal and
      an opportunity to cure same;

	 	 	 
	 	iii. 	
      committing an act of fraud, embezzlement, or willful
      breach of a fiduciary duty to Company, or a material breach of this
      Agreement (including the unauthorized disclosure of confidential or
      proprietary material information of Company or other violations of
      Sections 7 or 8);

	 	 	 
	 	iv. 	
      being convicted of (or pleading no contest to) a crime
      involving fraud, dishonesty, or moral turpitude or any felony;
or

	 	 	 
	 	v. 	
      being convicted of (or pleading no contest to) any
      violation of U.S. or foreign securities laws or entering into a cease and
      desist order with the Securities and Exchange Commission alleging
      violation of U.S. or foreign securities laws. No act, or failure to act,
      on Executive's part shall be considered “willful” unless done, or omitted
      to be done, by him other than in good faith and without reasonable belief
      that his action or omission was in the best interest of
  Company.

(c) “Change of Control” means an event occurring after
the effective date of this Agreement pursuant to which: 

	 	i. 	
      a merger, amalgamation, arrangement, consolidation,
      reorganization or transfer takes place in which securities of the Company
      possessing more than 50% of the total combined voting power of the
      Company’s outstanding voting securities are acquired by a person or
      persons different from the person holding those voting securities
      immediately prior to such event, and the composition of the board of
      Directors of the Company following such event is such that the directors
      of the Company prior to the transaction constitute less than 50% of the
      Board membership following the event;

- 13 - 

	 	ii. 	
      any person or any combination of persons acting jointly
      or in concert by virtue of an agreement, arrangement, commitment or
      understanding acquires, directly or indirectly, 50% or more of the voting
      rights attached to all outstanding voting securities; public and private
      placement share offerings are exempt from this clause;

	 	 	 
	 	iii. 	
      any person, or combination of persons, acting jointly or
      in concert by virtue of an agreement, arrangement or commitment or
      understanding acquires, directly or indirectly, the right to appoint a
      majority of the directors of the Company; or

	 	 	 
	 	iv. 	
      the Company sells, transfers or otherwise disposes of all
      or substantially all of its assets, except that no Change of Control will
      be deemed to occur if such sale or disposition is made to a subsidiary or
      subsidiaries of the Company.

(d) “COBRA” means the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended. 

(e) “Code” means the Internal Revenue Code of 1986, as
amended. 

(f) “Confidential Information” means all trade secrets,
proprietary information and other data or information (and any tangible
evidence, record or representation thereof), whether prepared, conceived or
developed by an employee of the Company (including the Executive) or received by
the Company from an outside source which is maintained in confidence by the
Company or any of its employees, contractors or customers including, without
limitation: 

	 	i. 	
      any ideas, drawings, maps, improvements, know-how,
      research, geological records, drill logs, inventions, innovations,
      products, services, sales, scientific or other formulae, core samples,
      processes, methods, machines, procedures, tests, treatments, developments,
      technical data, designs, devices, patterns, concepts, computer programs or
      software, records, data, training or service manuals, plans for new or
      revised services or products or other plans, items or strategy methods on
      compilation of information, or works in process, or any inventions or
      parts thereof, and any and all revisions and improvements relating to any
      of the foregoing (in each case whether or not reduced to tangible form)
      that relate to the business or affairs of the Company or that result from
      its marketing, research and/or development activities;

	 	 	 
	 	ii. 	
      any information relating to the relationship of the
      Company with any personnel, suppliers, principals, investors, contacts or
      prospects of the Company and any information relating to the requirements,
      specifications, proposals, orders, contracts or transactions of or with
      any such persons;

- 14 - 

	 	iii. 	
      any marketing material, plan or survey, business plan,
      opportunity or strategy, development plan or specification or business
      proposal, or any information relating to any geothermal projects in which
      the Company has an actual or potential interest;

	 	 	 
	 	iv. 	
      financial information, including the Company's costs,
      financing or debt arrangements, income, profits, salaries or wages;
    and

	 	 	 
	 	v. 	
      any information relating to the present or proposed
      business of the Company.

(g) “Direct Competition” means the ownership,
development, or advising regarding the same property or property located within
30 miles to one owned by the Company or one of its subsidiaries or affiliates.

(h) “Good Reason” shall mean any one of the conditions
set forth below, provided that Executive must provide notice to the Company
within sixty (60) days of the existence of such condition and the Company will
have thirty (30) days from receipt of such notice to remedy the condition, and
the termination of employment occurs no later than two years following the
initial existence of such condition. If the condition is not remedied within
such 30 day period, the following conditions will constitute “Good Reason”: 

	 	i. 	
      A material diminution in the Executive’s base
      compensation; or,

	 	 	 
	 	ii. 	
      A material diminution in the Executive’s authority,
      duties, or responsibilities; or,

	 	 	 
	 	iii. 	
      A material diminution in the authority, duties, or
      responsibilities of the supervisor to whom the Executive is required to
      report; or,

	 	 	 
	 	iv. 	
      A material diminution in the budget over which the
      Executive retains authority; or,

	 	 	 
	 	v. 	
      A material change in the geographic location at which the
      Executive must perform the services; or

	 	 	 
	 	vi. 	
      Any other action that constitutes a material breach by
      the Company of this Agreement;

(i) “Person” means an individual, partnership,
association, company, body corporate, trustee, executor, administrator, legal
representative and any national, provincial, state or municipal government; and

- 15 - 

(j) “Specified Employee” means a specified employee
within the meaning of Section 409A(a)(2)(B)(i) of the Code. 

(k) “Stock” means the Company’s common stock, which is,
as of the Effective Date of this Agreement, publicly traded on the NYSE MKT.

(l) “Stock Option” means an option to purchase shares of
Company Stock granted pursuant to the Company’s Stock Option Plan or another
plan approved by the Company’s Board of Directors, subject to the terms of such
grant and this Agreement. Any Stock Option designated and qualified as an
“incentive stock option” as defined in Section 422 of the Code shall be an
incentive stock option; any option not qualifying as an incentive stock option
shall be a non-qualified stock option. 

(m) “Stock Option Plan” means the 2009 Stock Incentive
Plan for U.S. Geothermal Inc. as amended from time to time, or another plan
adopted and approved by the Company’s Board of Directors.”

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