Document:

The Alkaline Water Company Inc.: Exhibit 10.3 - Filed by newsfilecorp.com

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS
SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT 

THE ALKALINE WATER COMPANY INC. 

	Warrant Shares: _________________	Initial Exercise Date: May 1, 2014
  

                   
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for
value received, _____________or its assigns (the “Holder”) is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on April 16, 2019 (the
“Termination Date”) but not thereafter, to subscribe for and purchase
from The Alkaline Water Company Inc., a Nevada corporation (the
“Company”), up to ______shares (as subject to adjustment hereunder, the
“Warrant Shares”) of Common Stock. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in Section 2(b). This Warrant is issued by the Company as of the date hereof
pursuant to Section 1 of the Engagement Agreement, dated as of March 12, 2014,
between the Company and H.C. Wainwright & Co., LLC and Section 4(a)(2) of
the Securities Act and Rule 506 promulgated thereunder. 

     Section
1.     Definitions. Capitalized terms used and
not otherwise defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the “Purchase Agreement”), dated
April 28, 2014, among the Company and the purchasers signatory thereto. 

     Section
2.      Exercise. 

                   
a)     Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed 

1 

facsimile copy of the Notice of Exercise in the form annexed
hereto. Within three (3) Trading Days following the date of exercise as
aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise procedure
specified in Section 2(c) below is specified in the applicable Notice of
Exercise. No ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of any Notice
of Exercise form be required. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the
Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder
shall surrender this Warrant to the Company for cancellation within three (3)
Trading Days of the date on which the final Notice of Exercise is delivered to
the Company. Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder shall have the
effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased. The Holder and the Company shall maintain records showing the number
of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise within one (1) Business Day of
receipt of such notice.

The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be less
than the amount stated on the face hereof. 

                   
b)     Exercise Price. The exercise price per share
of the Common Stock under this Warrant shall be $0.1875, subject to
adjustment hereunder (the “Exercise Price”). 

                   
c)     Cashless Exercise. If at the time of exercise
hereof there is no effective registration statement registering, or the
prospectus contained therein is not available for the issuance of the Warrant
Shares to the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in which the Holder shall
be entitled to receive a number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where: 

                   
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder
elects to exercise this Warrant by means of a “cashless exercise,” as set forth
in the applicable Notice of Exercise; 

                   
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

                   
(X) = the number of Warrant Shares that would be issuable upon exercise of this
Warrant in accordance with the terms of this Warrant if such exercise were by
means of a cash exercise rather than a cashless
exercise.                    

                   
“VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading 

2 

Market, the daily volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by the OTC Markets
Group, Inc. (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Holders of a majority in interest of the Warrants then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company. 

                   
d)     Mechanics of Exercise. 

    
i.      Delivery of Warrant Shares Upon
Exercise. The Company shall cause the Warrant Shares purchased hereunder to
be transmitted by the Transfer Agent to the Holder by crediting the account of
the Holder’s prime broker with The Depository Trust Company through its Deposit
or Withdrawal at Custodian system (“DWAC”) if the Company is then a
participant in such system and either (A) there is an effective registration
statement permitting the issuance of the Warrant Shares to or resale of the
Warrant Shares by Holder or (B) this Warrant is being exercised via cashless
exercise, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise by the date that is two (2) Trading Days after
the delivery to the Company of the Notice of Exercise (such date, the
“Warrant Share Delivery Date”), provided that the Company shall not be
obligated to deliver Warrant Shares hereunder unless the Company has received
the aggregate Exercise Price on or before the Warrant Share Delivery Date. The
Warrant Shares shall be deemed to have been issued, and Holder or any other
person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if any,
pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been
paid. If the Company fails for any reason to deliver to the Holder the Warrant
Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and not as a
penalty, for each $1,000 of Warrant Shares subject to such exercise (based on
the VWAP of the Common Stock on the date of the applicable Notice of Exercise),
$5 per Trading Day (increasing to $10 per Trading Day on the fifth Trading Day
after such liquidated damages begin to accrue) for each Trading Day after the

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second Trading Day following such
Warrant Share Delivery Date until such Warrant Shares are delivered or Holder
rescinds such exercise. 

    
ii.     Delivery of New Warrants Upon Exercise. If
this Warrant shall have been exercised in part, the Company shall, at the
request of a Holder and upon surrender of this Warrant certificate, at the time
of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant. 

    
iii.     Rescission Rights. If the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant
to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise. 

    
iv.     Compensation for Buy-In on Failure to Timely
Deliver Warrant Shares Upon Exercise. In addition to any other rights
available to the Holder, if the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to an exercise on or before
the Warrant Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the Company
shall (A) pay in cash to the Holder the amount, if any, by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, 

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without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof. 

    
v.     No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise
be entitled to purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the next
whole share. 

    
vi.     Charges, Taxes and Expenses. Issuance of
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
Warrant Shares, all of which taxes and expenses shall be paid by the Company,
and such Warrant Shares shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; provided, however,
that in the event Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto. The Company shall pay all
Transfer Agent fees required for same-day processing of any Notice of Exercise
and all fees to the Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day electronic
delivery of the Warrant Shares. 

    
vii.     Closing of Books. The Company will not close
its stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof. 

                   
e)     Holder’s Exercise Limitations. The Company
shall not effect any exercise of this Warrant, and a Holder shall not have the
right to exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates, and any other Persons acting as a group together
with the Holder or any of the Holder’s Affiliates), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates shall include the number of shares of
Common Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its
Affiliates and (ii) exercise or conversion of the unexercised or nonconverted
portion 

5 

of any other securities of the Company (including, without
limitation, any other Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the
Holder that the Company is not representing to the Holder that such calculation
is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance therewith. To
the extent that the limitation contained in this Section 2(e) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination and shall have no liability for
exercises of this Warrant that are not in compliance with the Beneficial
Ownership Limitation. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 2(e), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as
reflected in (A) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by the Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock was reported.
The “Beneficial Ownership Limitation” shall be 4.99% of the number
of shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this Warrant. The
Holder, upon not less than 61 days’ prior notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this Section 2(e),
provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant
held by the Holder and the provisions of this Section 2(e) shall continue to
apply. Any such increase or decrease will not be effective until the
61st day after such notice is delivered to the Company. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to 

6 

make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant. 

Section 3.     Certain
Adjustments. 

                   
a)     Stock Dividends and Splits. If the Company, at
any time while this Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of its Common Stock or
any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon exercise of this Warrant), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)
combines (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then in
each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event, and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made pursuant to
this Section 3(a) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification. 

                   
b)     [RESERVED] 

                   
c)     Subsequent Rights Offerings. In addition to
any adjustments pursuant to Section 3(a) above, if at any time while this
Warrant is outstanding the Company grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the
“Purchase Rights”), then the Holder will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).

7 

                   
d)     Pro Rata Distributions. During such time as
this Warrant is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders
of shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a
"Distribution"), at any time after the issuance of this Warrant, then, in
each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation) immediately before the
date of which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to
be determined for the participation in such Distribution (provided,
however, that, to the extent that the Holder's right to participate in
any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares of
Common Stock as a result of such Distribution to such extent) and the portion of
such Distribution shall be held in abeyance for the benefit of the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation). 

                   
e)     Fundamental Transaction. If, at any time while
this Warrant is outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of the Company
with or into another Person (but excluding a merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Company or changing
the name of the Company), (ii) the Company, directly or indirectly, effects any
sale, lease, license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, or (v) the
Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such other Person
or group acquires more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such stock or share purchase agreement or other business combination)
(each a “Fundamental Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each Warrant Share
that would have been issuable upon such exercise immediately prior to the 

8 

occurrence of such Fundamental Transaction, at the option of
the Holder (without regard to any limitation in Section 2(e) on the exercise of
this Warrant), the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
any additional consideration (the “Alternate Consideration”) receivable
as a result of such Fundamental Transaction by a holder of the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
Fundamental Transaction (without regard to any limitation in Section 2(e) on the
exercise of this Warrant). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, including, but not limited to, the Nasdaq Global Select
Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or
any Successor Entity (as defined below) shall, at the Holder’s option,
exercisable at any time concurrently with, or within 30 days after, the
consummation of the Fundamental Transaction, purchase this Warrant from the
Holder by paying to the Holder an amount of cash equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction. “Black Scholes Value” means
the value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”)
determined as of the day of consummation of the applicable Fundamental
Transaction for pricing purposes and reflecting (A) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction
and the Termination Date, (B) an expected volatility equal to the greater of
100% and the 100 day volatility obtained from the HVT function on Bloomberg as
of the Trading Day immediately following the public announcement of the
applicable Fundamental Transaction, (C) the underlying price per share used in
such calculation shall be the sum of the price per share being offered in cash,
if any, plus the value of any non-cash consideration, if any, being offered in
such Fundamental Transaction and (D) a remaining option time equal to the time
between the date of the public announcement of the applicable Fundamental
Transaction and the Termination Date. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor
(the “Successor Entity”) to assume in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section 3(e) pursuant to
written agreements in form and substance reasonably satisfactory to the Holder
and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder, deliver to the
Holder in 

9 

exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to
this Warrant which is exercisable for a corresponding number of shares of
capital stock of such Successor Entity (or its parent entity) equivalent to the
shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction, and with an exercise price which applies the
exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for the purpose
of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any
such Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction
Documents with the same effect as if such Successor Entity had been named as the
Company herein. 

                   
f)     Calculations. All calculations under this
Section 3 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding treasury shares, if any)
issued and outstanding. 

                   
g)     Notice to Holder. 

    
i.     Adjustment to Exercise Price. Whenever the
Exercise Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts requiring such
adjustment. 

    
ii.     Notice to Allow Exercise by Holder. If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights, (D) the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property,
or (E) the Company 

10 

shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Holder shall remain entitled to exercise this Warrant during
the period commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly set forth
herein. 

Section 4.     Transfer of
Warrant. 

                   
a)     Transferability. Neither this Warrant nor any
Warrant Shares issued upon exercise of this Warrant shall be sold, transferred,
assigned, pledged or hypothecated, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of the securities by any person for a period of 180 days immediately
following the date of effectiveness or commencement of sales of the offering
pursuant to which this Warrant is being issued, except the transfer of any
security: 

                   
(i)     by operation of law or by reason of reorganization
of the Company; 

                   
(ii)     to any FINRA member firm participating in the
offering and the officers and partners thereof, if all securities so transferred
remain subject to the lock-up restriction in this Section 4(a) for the remainder
of the time period; 

                  
(iii)     if the aggregate amount of securities of the
Company held by the Holder or related person do not exceed 1% of the securities
being offered; 

11 

                   
(iv)     that is beneficially owned on a pro-rata basis by
all equity owners of an investment fund, provided that no participating member
manages or otherwise directs investments by the fund, and participating members
in the aggregate do not own more than 10% of the equity in the fund; or 

                   
(v)     the exercise or conversion of any security, if all
securities received remain subject to the lock-up restriction in this Section
4(a) for the remainder of the time period. 

Subject to the foregoing restriction, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees, as
applicable, and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to the Company
unless the Holder has assigned this Warrant in full, in which case, the Holder
shall surrender this Warrant to the Company within three (3) Trading Days of the
date the Holder delivers an assignment form to the Company assigning this
Warrant full. The Warrant, if properly assigned in accordance herewith, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued. 

                   
b)     New Warrants. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office of
the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice. All
Warrants issued on transfers or exchanges shall be dated the initial issuance
date of this Warrant and shall be identical with this Warrant except as to the
number of Warrant Shares issuable pursuant thereto. 

                   
c)     Warrant Register. The Company shall register
this Warrant, upon records to be maintained by the Company for that purpose (the
“Warrant Register”), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to
the contrary. 

                   
d)     Transfer Restrictions. If, at the time of
surrender of this Warrant in connection with any transfer of this Warrant or the
sale of the Warrant Shares, the transfer of this Warrant or the Warrant Shares,
as applicable, shall not be either (i) 

12 

registered pursuant to an effective registration statement
under the Securities Act or under applicable state securities or blue sky laws
or (ii) eligible for resale without volume or manner-of-sale restrictions or
current public information requirements pursuant to Rule 144, the Company may
require, as a condition of allowing such transfer or sale, that the Holder
provide to the Company an opinion of counsel selected by the Holder and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer or sale does not require registration of such transferred security
under the Securities Act. 

                   
e)     Representation by the Holder. The Holder, by
the acceptance hereof, represents and warrants that (a) it is acquiring this
Warrant and, upon exercise hereof, will acquire the Warrant Shares issuable upon
such exercise, for its own account and not with a view to or for distributing or
reselling such Warrant Shares or any part thereof in violation of the Securities
Act or any applicable state securities law, except pursuant to sales registered
or exempted under the Securities Act and (b) at the time the Holder was offered
this Warrant, it was, and as of the date hereof it is, and on each date on which
it exercises this Warrant, it will be either an “accredited investor” as defined
in Rule 501(a) under the Securities Act or a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act. 

Section 5.     Miscellaneous.

                   
a)     No Rights as Stockholder Until Exercise. This
Warrant does not entitle the Holder to any voting rights, dividends or other
rights as a stockholder of the Company prior to the exercise hereof as set forth
in Section 2(d)(i), except as expressly set forth in Section 3. 

                   
b)     Loss, Theft, Destruction or Mutilation of
Warrant. The Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate relating to the Warrant Shares, and in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or
stock certificate, if mutilated, the Company will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate. 

                   
c)     Saturdays, Sundays, Holidays, etc. If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then, such action may be
taken or such right may be exercised on the next succeeding Business Day. 

                   
d)     Authorized Shares.

                   
The Company covenants that, during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of the Warrant Shares 

13 

upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its issuance of
this Warrant shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary
Warrant Shares upon the exercise of the purchase rights under this Warrant. The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant and payment for such Warrant Shares in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).

                   
Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its articles of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(ii) take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof, as may be, necessary to
enable the Company to perform its obligations under this Warrant. 

                   
Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

                   
e)     Jurisdiction. All questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement. 

                   
f)     Restrictions. The Holder acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
and the Holder does not utilize 

14 

cashless exercise, will have restrictions upon resale imposed
by state and federal securities laws. 

                   
g)     Nonwaiver and Expenses. No course of dealing
or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s
rights, powers or remedies. Without limiting any other provision of this Warrant
or the Purchase Agreement, if the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any material damages
to the Holder, the Company shall pay to the Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate proceedings, incurred
by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder. 

                   
h)     Notices. Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement. 

                   
i)      Limitation of Liability. No provision
hereof, in the absence of any affirmative action by the Holder to exercise this
Warrant to purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company. 

                   
j)      Remedies. The Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate. 

                   
k)     Successors and Assigns. Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of any Holder from
time to time of this Warrant and shall be enforceable by the Holder or holder of
Warrant Shares. 

                   
l)      Amendment. This Warrant may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Holder. 

                   
m)     Severability. Wherever possible, each
provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant. 

15 

                   
n)     Headings. The headings used in this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant. 

******************** 
(Signature Page Follows)

 

 

16 

     IN WITNESS WHEREOF, the Company
has caused this Warrant to be executed by its officer thereunto duly authorized
as of the date first above indicated. 

	 	THE ALKALINE WATER COMPANY INC. 
	 	  
	 	  
	 	By:__________________________________________
    
	 	       Name: 
	 	       Title:

17 

NOTICE OF EXERCISE 

TO:     THE ALKALINE WATER COMPANY INC.

                   
(1) The undersigned hereby elects to purchase ________Warrant Shares of the
Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any. 

                   
(2) Payment shall take the form of (check applicable box): 

[ ] in lawful money of the United
States; or 

[ ] if permitted, the cancellation of
such number of Warrant Shares as is necessary, in accordance with the formula
set forth in subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c). 

                   
(3) Please issue said Warrant Shares in the name of the undersigned or in such
other name as is specified below: 

_______________________________

The Warrant Shares shall be delivered to the following DWAC
Account Number: 

_______________________________

_______________________________

_______________________________

[SIGNATURE OF HOLDER] 

Name of Investing Entity:
________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity:
_________________________________________________
Name of Authorized
Signatory:
___________________________________________________________________
Title of
Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________

EXHIBIT B 

ASSIGNMENT FORM 

      (To assign the foregoing
Warrant, execute this form and supply required information. Do not use this form
to purchase shares.) 

     FOR VALUE RECEIVED, the foregoing
Warrant and all rights evidenced thereby are hereby assigned to 

	Name: 	____________________________________________________________
	  	(Please Print) 
	Address: 	____________________________________________________________
	  	(Please Print) 
	Dated:
      _______________________________________________________	                                         
	Holder’s Signature:
      _____________________________________________	
	Holder’s Address:
      ______________________________________________	

NOTE: The signature to this Assignment Form must correspond
with the name as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever. Officers of corporations and those acting
in a fiduciary or other representative capacity should file proper evidence of
authority to assign the foregoing Warrant.Cardero Resource Corp. - Exhibit 4.4 - Filed by newsfilecorp.com

SUBSCRIPTION AGREEMENT 

SENIOR SECURED NOTE 

TO:     
 CARDERO RESOURCE CORP. (the “Corporation”) 

The undersigned (the “Purchaser”) hereby irrevocably
subscribes for and agrees to purchase, on and subject to the terms and
conditions set forth herein, a Senior Secured Note of the Corporation in the
aggregate principal amount of $• (the “Note”) for the aggregate
purchase price of $•. Capitalized terms used herein shall have the meaning
ascribed thereto in Exhibit “A” - Defined Terms or the Note, as
applicable. All references to dollar amounts herein shall be to lawful currency
of the United States of America unless otherwise stated. 

IN WITNESS WHEREOF the Purchaser has duly executed this
Subscription Agreement. 

DATED this _____________ day of August, 2013. 

	Purchaser’s Name: 	Purchaser’s Address:

	By: 	 
    	 
	 	Name: 	 
	 	Authorized Signing Officer 	 

SECTION 1 THE NOTE 

The Note shall be in the form of Exhibit “B” - Form of
Senior Secured Note attached hereto.

SECTION 2 WARRANTS 

As additional consideration for the Purchaser entering into
this Subscription Agreement and purchasing the Note, the Corporation shall on
the Closing Date issue to the Purchaser • transferable share purchase
warrants of the Corporation (the “Warrants”), subject to the acceptance
for filing of the issuance of the Warrants by the TSX. Each Warrant will be
exercisable into one Common Share (a “Warrant Share”) for a period of
seven years from the date of issue at a price of Cdn$0.095 (the “Exercise
Price”). The Warrants shall be subject to the hold periods under applicable
Securities Laws. 

The parties acknowledge that the TSX requires the disinterested
shareholders of the Corporation to approve the exercise of the Warrants to the
extent that such exercise will materially affect control of the Corporation
(“Control Person Approval”). As a result, the Warrants will bear the
legend set out in SECTION 6(e)(ii). At any time, the Purchaser may elect by
providing written notice to the Corporation (“Control Person Approval
Notice”) that Control Person Approval be sought, in which case the
Corporation will use its best efforts to obtain Control Person Approval within
60 days from the date of the Control Person Approval Notice. Should the
Corporation fail to obtain the Control Person Approval, the Purchaser will
retain the Warrants. 

- 2 - 

The parties also acknowledge that the TSX and the NYSE MKT may
require additional filings from the Purchaser and Mr. Robert Kopple before the
TSX and the NYSE MKT will approve the Purchaser and any of its Associates or
Affiliates holding, in the aggregate, Common Shares in excess of 10% of the
Corporation’s outstanding capital, and the ability of the Purchaser to exercise
Warrants which would result in such 10% level being exceeded will be subject to
such approval from the TSX and NYSE MKT being obtained. As a result, the
Warrants will bear the legend set out in SECTION 6(e)(iii). 

SECTION 3 PAYMENT 

Payment of the aggregate purchase price for the Note, in the
amount of $•, must be delivered by the Purchaser to the Corporation on the
Closing Date and shall be made by certified cheque, bank draft or wire
transfer drawn on a Canadian chartered bank and payable to the
Corporation or payable in such other manner as may be specified by the
Corporation. It is acknowledged and agreed that the Corporation is responsible
for all reasonable third party legal, due diligence and related out-of-pocket
expenses incurred by the Purchaser, subject to receipt of supporting
documentation, all of which together with any fees payable hereunder, shall be,
at the Purchaser’s option, paid by the Corporation at Closing or deducted from
such payment by the Purchaser at Closing. 

SECTION 4 CLOSING 

Delivery of the Note and Warrants and payment for the Note will
be completed (the “Closing”) at the offices of Gowling Lafleur Henderson
LLP counsel to the Purchaser at 9 a.m. (Vancouver time) (the “Closing
Time”) or such other time or place as the Corporation and the Purchaser may
agree, on the date hereof, or such earlier or later date as the Purchaser and
the Corporation may agree in writing (the “Closing Date”). 

At the Closing Time, the Corporation shall deliver to the
Purchaser: 

(a)        the Note
registered in the name of the Purchaser; 

(b)        certificates
representing the Warrants registered in the name of the Purchaser; 

(c)        the requisite
documents and certificates as contemplated in SECTION 12 hereof and the Note,
all in form and substance satisfactory to the Purchaser, acting reasonably; and

(d)        such further
documentation as may be contemplated herein or as counsel to the Purchaser or
any applicable regulatory authorities may reasonably require, 

against delivery by the Purchaser to the Corporation of this
Subscription Agreement duly executed and payment of the purchase price as set
out in Section 1 above. 

SECTION 5 REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE PURCHASER 

The Purchaser hereby represents, warrants and covenants to and
with the Corporation that: 

- 3 - 

(a)        the Purchaser is
acquiring the securities described herein for its own account and not with a
view to, or for sale in connection with, any distribution thereof, nor with the
intention of distributing or reselling the same, provided, however, that by
making the representation herein, the Purchaser does not agree to hold any of
the securities for any minimum or other specific term and reserves the right to
dispose of the securities at any time in accordance with or pursuant to a
registration statement or an exemption under applicable Securities Laws, subject
to compliance with the legends that shall be placed on the Note and the Warrants
pursuant to SECTION 6(d) and 6(e). The Purchaser is an “Accredited Investor” as
such term is defined in Rule 501 of Regulation D, as promulgated under the
Securities Act and as such term is defined in National Instrument 45-106 adopted
by the Canadian Securities Administrators and has completed the Canadian
Accredited Investor certificate and the U.S. Accredited Investor certificate in
the forms required by the Corporation, in its sole discretion; 

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

(c)        the Purchaser
is resident in California, United States; 

(d)        the Purchaser has
all requisite legal capacity and authority to enter into this Subscription
Agreement and to take all actions required pursuant to this Subscription
Agreement; and 

(e)        no finder,
broker, agent, or other intermediary has acted for or on behalf of the Purchaser
in connection with the negotiation or consummation of the transactions
contemplated by this Subscription Agreement, and no fee will be payable by the
Purchaser or the Corporation to any such Person in connection with such
transactions. 

SECTION 6 PURCHASER’S ACKNOWLEDGEMENTS

The Purchaser acknowledges and agrees, which acknowledgements
and agreements shall survive Closing, that: 

(a)        it has not been
provided with a prospectus or with an offering memorandum as defined in the
applicable Securities Laws or any similar document in connection with its
purchase of the Note and the Warrants; 

(b)        the Purchaser
further acknowledges and expressly consents to: 

	 	(i) 	
      the disclosure of any information about the Purchaser
      (“Personal Information”) by the Corporation to the TSX and NYSE MKT
      and other applicable regulatory authorities, as required, and

	 	 	 
	 	(ii) 	
      the collection, use and disclosure of Personal
      Information by the TSX and NYSE MKT for such purposes as may be identified
      by the TSX and NYSE MKT, from time to time;

- 4 - 

(c)        no representation
has been made respecting the value or trading price of the Note, Warrants or
Warrant Shares; 

(d)        certificates
representing the Note, Warrants and Warrant Shares shall bear the following
legends: 

THE SECURITIES REPRESENTED HEREBY [AND
FOR WARRANTS, ADD: AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (the “1933 ACT”),
OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF CARDERO RESOURCE CORP. (THE “COMPANY”)
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT; (B) TO THE
COMPANY, (C) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE
1933 ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS OR (D) WITHIN THE UNITED
STATES (1) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
PROVIDED BY RULE 144 OR RULE 144A THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE
WITH ANY APPLICABLE STATE SECURITIES LAWS OR (2) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS, AND
THE HOLDER HAS PROVIDED THE COMPANY, PRIOR TO SUCH OFFER, SALE OR TRANSFER WITH
AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY OR
OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH SECURITIES ARE REGISTERED
UNDER THE 1933 ACT OR MAY BE SO OFFERED, SOLD OR TRANSFERRED WITHOUT
REGISTRATION UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES. 

UNLESS PERMITTED UNDER APPLICABLE
SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY
BEFORE DECEMBER n, 2013 [the date that is four months and one date from the date
of issue to be inserted].

(e)        the certificate
representing the Warrants shall also bear the following legend[s]: 

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

- 5 - 

	 	(ii) 	
      THE HOLDER OF THIS SECURITY SHALL NOT BE ENTITLED TO
      EXERCISE ANY WARRANTS REPRESENTED HEREBY AT ANY TIME WHERE, FOLLOWING SUCH
      EXERCISE, SUCH HOLDER AND ITS ASSOCIATES AND AFFILIATES WOULD HOLD MORE
      THAN 19.9% OF THE THEN ISSUED AND OUTSTANDING COMMON SHARES OF CARDERO
      RESOURCE CORP. (THE “CORPORATION”) UNLESS PRIOR APPROVAL OF THE TSX OR THE
      CORPORATION'S SHAREHOLDERS IS OBTAINED IN ACCORDANCE WITH THE POLICIES OF
      THE TSX;

	 	 	 
	 	(iii) 	
      THE HOLDER OF THIS SECURITY SHALL NOT BE ENTITLED TO
      EXERCISE ANY WARRANTS REPRESENTED HEREBY AT ANY TIME WHERE, FOLLOWING SUCH
      EXERCISE, SUCH HOLDER AND ITS ASSOCIATES AND AFFILIATES WOULD HOLD 10% OR
      MORE OF THE THEN ISSUED AND OUTSTANDING COMMON SHARES OF THE CORPORATION
      UNLESS PRIOR APPROVAL OF THE TSX IS OBTAINED IN ACCORDANCE WITH THE
      POLICIES OF THE TSX;

	 	 	 
	 	(iv) 	
      THESE WARRANTS AND THE SECURITIES DELIVERABLE UPON
      EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
      AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE
      UNITED STATES. THESE WARRANTS MAY NOT BE EXERCISED BY OR ON BEHALF OF A
      U.S. PERSON OR A PERSON IN THE UNITED STATES UNLESS THESE WARRANTS AND THE
      SECURITIES ISSUABLE UPON EXERCISE OF THESE WARRANTS HAVE BEEN REGISTERED
      UNDER THE 1933 ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH
      STATE OR EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS ARE AVAILABLE.
      “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE
      1933 ACT; and

	 	 	 
	 	(v) 	
      THE HOLDER OF THIS SECURITY SHALL NOT BE ENTITLED TO
      EXERCISE ANY WARRANTS REPRESENTED HEREBY UNTIL THE SECURITIES DELIVERABLE
      UPON EXERCISE HAVE BEEN APPROVED FOR LISTING BY THE NYSE MKT, OR SUCH
      APPROVAL IS NO LONGER NECESSARY.

(f)        the Purchaser
understands that the Warrants may not be exercised by, or for the account or
benefit of, a U.S. Person (as defined in Regulation S under the Securities Act)
or a person in the United States unless
an exemption from the registration requirements of the Securities Act and
applicable state securities laws is available to the holder and the holder has
furnished an opinion of counsel of recognized standing in form and substance
reasonable satisfactory to the Corporation to such effect or, at the
Corporation’s option, other evidence of exemption satisfactory to the
Corporation; provided, however, that the Purchaser will not be required to
deliver an opinion of counsel in connection with its exercise of the Warrants
for its own account at a time when it is an Accredited Investor (as defined in
Rule 501 of Regulation D under the Securities Act) and has provided the
Corporation with a representation to such effect;

- 6 - 

(g)        the Purchaser
understands that the Note and the Warrants are being, and the Warrant Shares
will be, offered and sold to the Purchaser in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and from the prospectus and registration requirements of Canadian
securities laws and that the Corporation is relying upon the truth and accuracy
of, and the Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the securities, and a consequence of acquiring
securities pursuant to this exemption, certain protections, rights and remedies
provided by Securities Laws, including statutory rights of rescission or
damages, will not be available to the Purchaser; 

(h)        no securities
commission or similar regulatory authority has reviewed or passed on the merits
of the Note, the Warrants or the Warrant Shares, there is no government or other
insurance covering the Note, the Warrants and the Warrant Shares and there are
risks associated with the purchase of the Note and an investment in the
Warrants; the Purchaser, either alone or together with its representatives, has
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Note and the Warrants, and has so evaluated the merits and
risks of such investment. The Purchaser is able to bear the economic risk of an
investment in the Note and the Warrants and, at the present time, is able to
afford a complete loss of such investment; 

(i)        the Purchaser
understands that the Warrant Shares have not yet been approved for listing by
the NYSE MKT and that Warrants may not be exercised until such approval is
obtained or no longer necessary;

(j)        the Purchaser is not
purchasing the Note or the Warrants as a result of any advertisement, article,
notice or other communication regarding the securities published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement; 

(k)        the Purchaser: 

	 	(i) 	
      has been advised to consult the Purchaser’s own legal
      advisors with respect to trading in the Note, the Warrants and Warrant
      Shares and with respect to resale restrictions imposed by applicable
      Securities Laws in the jurisdiction in which the Purchaser
  resides;

- 7 - 

	 	(ii) 	
      is solely responsible for determining and complying with
      applicable resale restrictions before selling the Note, Warrants or
      Warrant Shares; and

	 	 	 
	 	(iii) 	
      is aware that the Purchaser may not be able to resell the
      Note and the Warrants except in accordance with limited exemptions under
      applicable Securities Laws.

SECTION 7 RELIANCE UPON REPRESENTATIONS,
WARRANTIES AND COVENANTS OF PURCHASER 

The Purchaser acknowledges that its representations, warranties
and covenants contained in this Subscription Agreement are made with the intent
that they may be relied upon by the Corporation (a) to, among other things,
determine the Purchaser’s eligibility to purchase the Note under this
Subscription Agreement and issue the Purchaser the Warrants, and (b) in issuing
the Note and Warrants contemplated hereunder. 

SECTION 8 REPRESENTATIONS AND WARRANTIES OF
THE CORPORATION AND GUARANTOR 

Subject to SECTION 9, each of the Corporation and the Guarantor
jointly and severally represents, warrants and covenants to and with the
Purchaser that: 

(a)        each of the
Cardero Parties has been duly incorporated and organized under the Laws of its
jurisdiction of incorporation and is validly existing and is current and
up-to-date with all filings required to be made under the Laws of its
jurisdiction of incorporation and has all requisite corporate power to carry on
its business as now conducted and as presently proposed to be conducted and to
own, lease or operate its properties, business and assets, and no steps or
proceedings have been taken by any Person, voluntary or otherwise, requiring or
authorizing its dissolution or winding up; 

(b)        each of the
Cardero Parties has full power and authority to enter into each of the
Transaction Documents and to do all acts and things and execute and deliver all
documents as are required hereunder or thereunder to be done, observed,
performed or executed and delivered by it in accordance with the terms hereof
and thereof; 

(c)        each of the Cardero
Parties has taken all corporate steps necessary to duly authorize all matters in
connection with this Subscription Agreement, including, without limitation, (i)
the execution and delivery of the Transaction Documents and such other
agreements and instruments as contemplated herein; (ii) the allotment and
issuance of the Warrants; and (iii) the allotment and reservation for issuance
of the Warrant Shares and, when entered into, the Transaction Documents will
create valid and legally binding obligations of the Cardero Parties enforceable
against the Cardero Parties in accordance with their respective terms; 

- 8 - 

(d)        the Guarantor is a
wholly-owned Subsidiary of the Corporation and other than as disclosed in the
Disclosure Record, the Corporation has no other material Subsidiaries or
Investments; 

(e)        none of the Cardero
Parties has committed any act of bankruptcy or is insolvent, or proposed a
compromise or arrangement to its creditors generally, had a petition or
receiving order in bankruptcy filed against it, made a voluntary assignment in
bankruptcy, taken any proceedings with respect to a compromise or arrangement,
taken any proceedings to have a receiver appointed for any of its property or
had any execution or distress become enforceable or become levied upon any of
its property;

(f)        each of the
Cardero Parties is licensed, registered or qualified in the Province of British
Columbia, and carrying on the business thereof related to the Project in
material compliance with all applicable Laws, rules and regulations of the
Province of British Columbia; 

(g)        other than as
disclosed in the Disclosure Record in writing, there is no location at which the
Corporation or the Guarantor operates or has any tangible assets (except for
inventory in transit) including, without limitation, any inventory, equipment or
real property held, managed or stored by third parties on their behalf, sold on
credit or in the possession of third parties. Schedule 1 to the general security
agreement of the Corporation in favour of, among others, the Purchaser
represents a true, correct and complete list, as of the date hereof, of each
place of business of the Corporation and the Guarantor, as the case may be, each
collateral location and the chief executive office and principal place of
business of the Corporation and the Guarantor; 

(h)        the Corporation
is authorized to issue an unlimited number of Common Shares, of which
113,436,270 Common Shares were issued and outstanding as fully paid and
non-assessable shares in the capital of the Corporation on the date hereof; 

(i)        excepting only as
set out in the Disclosure Record with respect to the Corporation's securities,
no Person has any agreement, option, right or privilege (whether pre-emptive,
contractual or otherwise) capable of becoming an agreement, for the purchase,
acquisition, subscription for or issue of any of the unissued shares or other
securities of any of the Cardero Parties; 

(j)        none of the
Cardero Parties has made any loans to or guaranteed the obligations of any
Person excepting only (i) the Senior Secured Notes, (ii) the Guarantee, (iii)
the Luxor Notes, (iv) the Luxor Guarantee and (iii) loans between the Guarantor,
the Corporation and other Subsidiaries; 

(k)        none of the
Cardero Parties has incurred any Debt, except pursuant to the Luxor Notes, the
Luxor Guarantee, the BMO Mastercard, the BMO Security and the John Deere Lease.

(l)        the Corporation is a
reporting issuer or the equivalent only in the Reporting Jurisdictions and is in
compliance with its obligations under the applicable Securities Laws of such
jurisdictions, and of the applicable rules and policies of the TSX, in all material respects and is not included
in any list of defaulting reporting issuers maintained by the securities
commission of such jurisdictions;

- 9 - 

(m)        the outstanding
Common Shares of the Corporation are listed and posted for trading on the TSX;

(n)        after giving effect
to the issuance of the Senior Secured Notes and the Guarantee, the realizable
value of the Corporation’s and the Guarantor’s assets on a consolidated basis,
and the Guarantor’s assets on an individual basis, is greater than the sum of
its liabilities (actual and contingent), and each of them are able to meet its
liabilities as they generally become due. None of the Corporation or the
Guarantor, any creditor of any of them or any other Person has instituted any
proceeding or taken any corporate action or executed any agreement in connection
with the commencement of any proceeding: 

	 	(i) 	
      seeking to adjudicate the Corporation or the Guarantor a
      bankrupt or insolvent;

	 	 	 
	 	(ii) 	
      seeking liquidation, dissolution, winding-up,
      reorganization, arrangement, protection, relief or composition of the
      Corporation, the Guarantor or any material part of their property or debt,
      or making a proposal under any Law relating to bankruptcy, insolvency,
      reorganization or compromise of debts or other similar Laws; or

	 	 	 
	 	(iii) 	
      seeking appointment of a receiver, receiver and manager,
      trustee, agent, custodian, monitor, or liquidator or other similar
      official for the Corporation, the Guarantor or for any material part of
      their properties and assets;

(o)        the Corporation has
the power and authority to create, issue and deliver the Note and the Warrants;

(p)        upon the
issuance thereof, the Warrants will be validly created and issued; 

(q)        the Warrant Shares
have been duly and validly allotted and reserved for issuance upon the exercise
of the Warrants, and the Warrant Shares will, when issued upon due exercise of
the Warrants in accordance with the terms set forth in the Warrant Certificate,
be validly issued as fully paid and non assessable Common Shares; 

(r)        the issuance of
the Note and Warrants is exempt from the prospectus requirements of applicable
Securities Laws and no document will be required to be filed and no proceeding
taken or approval, permit, consent, order or authorization obtained by the
Corporation under the applicable Securities Law in Canada in connection with the
first trade of the Warrants and Warrant Shares provided that: the Corporation is
and has been a “reporting issuer” (as defined under the applicable Securities
Law) in a jurisdiction of Canada for the four months immediately preceding the
first trade; at the time of such trade, at least four months have elapsed from
the “distribution date” (as such term is defined in National Instrument 45-102
Resale of Securities (“NI 45-102”); the certificates representing the
Warrants, and if issued within four months from the distribution date, the certificates representing the Warrant
Shares, carry a legend, or an ownership statement issued under a direct
registration system or other electronic book-entry system acceptable to the
regulator bears a legend restriction notation, as prescribed by section
2.5(2)3(i) of NI 45-102; such trade is not a “control distribution” as defined
in NI 45-102; no unusual effort is made to prepare the market or create a demand
for the securities that are the subject of the trade; no extraordinary
commission or other consideration is paid to a person or company in respect of
the trade; and, if the Purchaser is an insider (as defined under applicable
Securities Law) of the Corporation, the Purchaser has no reasonable grounds to
believe that the Corporation is in default of “securities legislation” (as
defined in National Instrument 14-101 Definitions)); 

- 10 - 

(s)        none of the
execution and delivery of the Transaction Documents, the compliance by the
Cardero Parties with the provisions of the Transaction Documents or the
consummation of the transactions contemplated herein and the issue of the Note
or the Warrants to the Purchaser, for the consideration and upon the terms and
conditions set forth herein, does or will: (i) require the consent, approval,
Authorization, order or agreement of, or registration or qualification with, any
Governmental Authority, or any other, body or authority, court, stock exchange,
securities regulatory authority or other Person, except (A) such as have been
obtained, (B) acceptances for filing/approvals of the Exchanges, and (C) Control
Person Approval; (ii) conflict with or result in any breach or violation of any
of the provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which the any of the
Cardero Parties is a party or by which it or any of the properties or assets
thereof is bound; or (iii) conflict with or result in any breach or violation of
any provisions of, or constitute a default under the articles or by-laws of any
of Cardero Parties or any resolution passed by the directors (or any committee
thereof) or shareholders of any of the Cardero Parties, or any statute or any
judgment, decree, order, rule, policy or regulation of any court, Governmental
Authority, any arbitrator, stock exchange or securities regulatory authority
applicable to any of the Cardero Parties or any of the properties or assets
thereof; 

(t)        there is no material
change, as defined in applicable Securities Law, relating to any of the Cardero
Parties, or change in any material fact, as defined in applicable Securities
Law, relating to the Common Shares, which has not been or will not be fully
disclosed in accordance with the requirements of Applicable Securities
Legislation and the policies of the Exchanges. The Disclosure Record does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
(collectively a “Misrepresentation”), it being acknowledged that
if there is any inconsistency between two or more documents comprising the
Disclosure Record regard shall be had to the last filed document. The documents
that comprise the Disclosure Record, as of their respective dates (and as of the
dates of any amendments thereto), complied as to both form and content in all
material respects with the requirements of applicable Securities Laws or were
amended to correct deficiencies identified by securities commissions or similar
securities regulatory authorities; 

- 11 - 

(u)        the Corporation
is not an investment company registered or required to be registered under the
U.S. Investment Company Act of 1940, as amended. 

(v)        the Corporation
is a “foreign private issuer” (as such term is defined in Rule 3b-4) under the
Exchange Act. 

(w)        except with respect
to the NYSE MKT, no order or ruling suspending the sale or ceasing the trading
in any securities (including the Common Shares) of any of the Cardero Parties or
prohibiting the sale of such securities has been issued by any securities
regulatory authority and no such order or ruling is outstanding against any of
the Cardero Parties or their directors, officers or promoters or against any
other companies that have common directors, officers or promoters and no
investigations or proceedings for such purposes have been threatened or, to the
best of the Cardero Parties’ knowledge, are pending or contemplated; 

(x)        the Corporation
has devised and maintained a system of disclosure controls and procedures
designed to ensure that information required to be disclosed by the Corporation
under Securities Laws is recorded, processed, summarized and reported within the
time periods specified in such Securities Laws. Such disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Corporation in the
Disclosure Record is accumulated and communicated to the management of the
Corporation, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure; 

(y)        the Peace River
Lands are registered in the name of P. Burns Peace River Resources Corporation,
and the Peace River Partnership has warranted in the Peace River Coal Lease that
the Peace River Partnership is the beneficial owner of a 100% interest in the
Peace River Lands and that title to the Peace River Lands is free and clear of
all Encumbrances (as defined in the Peace River Coal Lease) and the Corporation
has no reason to believe that such warranties are not true and correct; 

(z)        all agreements
by which the Cardero Parties hold an interest in properties, business or assets
are in good standing according to their terms and such properties, business or
assets by which the Cardero Parties hold an interest are in good standing under
all Applicable Law of the jurisdictions in which they are situated; 

(aa)      the
Cardero Parties have not approved, and are not contemplating, entering into any
agreement in respect of, or have any knowledge of: (i) the purchase of any
property or interest therein for an amount greater than $100,000 (other than the
purchase of real property to be used by the Guarantor to construct office
premises to be used in relation to the Project, for and at a purchase price not
to exceed $500,000), or the sale, transfer or other disposition of any
properties, business or assets or interest therein having a value in excess of
$100,000 currently owned, directly or indirectly, by the Cardero Parties whether
by asset sale, transfer of shares or otherwise; or (ii) any Change of Control
(by sale or transfer of shares or sale of all or substantially all of the
property and assets of the Cardero Parties) of any of the Cardero Parties; 

- 12 - 

(bb)      the
Corporation has complied with, and will continue to comply with, all obligations
under applicable Securities Law; 

(cc)      the
consolidated financial statements of the Corporation contained in the Disclosure
Record, filed with any securities commission, have all been prepared in
accordance with Canadian generally accepted accounting principles and,
subsequent to the last interim period of the Corporation's 2011 fiscal year,
IFRS, and present fully, fairly and correctly in all material respects, the
financial condition of the Cardero Parties as at the dates thereof and the
results of the operations and the changes in the financial position of the
Cardero Parties for the periods then ended, and reflect accurately and
adequately the financial position and all material liabilities (accrued,
absolute, contingent or otherwise) of the Cardero Parties as at the dates
thereof, and no adverse material changes in the financial position of the
Cardero Parties has taken place since the dates thereof; 

(dd)      the
Cardero Parties have no liabilities, fixed or contingent, that are not reflected
in the most recently published financial statements (or notes thereto) of the
Guarantor contained in the Disclosure Record or otherwise disclosed in writing
to the Purchaser; 

(ee)      all
taxes, duties, royalties, levies, imposts, assessments, deductions, charges or
withholdings and all material liabilities with respect thereto including any
penalty and interest payable with respect thereto due and payable by the Cardero
Parties have been paid. All tax returns, declarations, remittances and filings
required to be filed by the Cardero Parties have been filed with all appropriate
Governmental Authorities and all such returns, declarations, remittances and
filings are complete and accurate and no material fact or facts have been
omitted therefrom which would make any of them misleading. No examination of any
tax return of the Cardero Parties is currently in progress (to the knowledge of
the Corporation) and there are no issues or disputes outstanding with any
Governmental Authority respecting any taxes that have been paid, or may be
payable, by the Cardero Parties; 

(ff)     
 to the best of the Corporation’s knowledge, none of the Cardero Parties is
materially in violation of any Applicable Law relating to Hazardous Materials or
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, or any other Environmental Law;
(ii) the Cardero Parties have timely filed renewals for, all permits, licenses,
Authorizations and approvals required under any applicable Environmental Laws
and the Cardero Parties are in compliance with such permits, Authorizations and
approvals; (iii) there are no pending or, to the best of the Corporation’s
knowledge, threatened administrative, regulatory or judicial actions, suits,
demands, claims, liens, notices of non-compliance or violation, investigation or
proceedings relating to any Environmental Laws against the Cardero Parties; and
(iv) there are no events or circumstances that would reasonably be expected to
form the basis of an order for investigation, clean-up, monitoring, natural
resource damages, or remediation, or other mandatory or prohibitory obligation,
or an action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Cardero Parties relating to any Environmental
Laws; 

- 13 - 

(gg)      none
of the directors, officers or employees of the Cardero Parties or any Associate
or Affiliate of any of the foregoing, had or has any material interest, direct
or indirect, in any transaction or any proposed transaction with the Cardero
Parties which, as the case may be, materially affects, is material to or will
materially affect any of the Cardero Parties; 

(hh)      the
assets of each of the Cardero Parties and its business and operations are
insured against loss or damage with insurers on a basis consistent with
insurance obtained by reasonably prudent participants in comparable businesses
in comparable jurisdictions, such coverage is in full force and effect, and the
Cardero Parties have not failed to promptly give any notice of any material
claim thereunder. There are no claims by the Cardero Parties under any such
policy or instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause; 

(ii)     
 none of the Cardero Parties is in violation of any term of its Constating
Documents. Other than the Carbon Mountain Claim and as alleged in such claim,
none of the Cardero Parties is in violation of any term or provision of any
agreement, indenture or other instrument applicable to it which could reasonably
be expected to result in any Material Adverse Effect and none of the Cardero
Parties is in default in the payment of any obligation owed by it which is now
due and there is no action, suit, proceeding or investigation commenced, pending
or, to the best of the Corporation’s knowledge, threatened which, either in any
single case or in the aggregate, could reasonably be expected to result in any
Material Adverse Effect or in any material liability on the part of any of the
Cardero Parties or which places, or could reasonably be expected to place in
question the validity or enforceability of this Subscription Agreement, any
other Transaction Document or any document or instrument delivered, or to be
delivered, by any of the Cardero Parties pursuant hereto; 

(jj)     
 all of the agreements and other documents and instruments pursuant to
which the Cardero Parties hold any interest in the Project are valid and
subsisting agreements, documents or instruments in full force and effect,
enforceable in accordance with their terms and none of the Cardero Parties, nor
any other party thereto, is in default nor has default been alleged of any of
the provisions of any such agreements, documents or instruments; 

(kk)    
 except as alleged in the Carbon Mountain Claim, none of the Cardero
Parties is in default of any term, covenant or condition under or in respect of
any judgment, order, agreement or instrument to which it is a party or to which
it or any of the property or assets thereof are or may be subject, and no event
has occurred and is continuing, and no circumstance exists which has not been
waived, which constitutes a default in respect of any commitment, agreement,
document or other instrument to which any of the Cardero Parties is a party or
by which it is otherwise bound entitling any other party thereto to accelerate
the maturity of any amount owing thereunder; 

(ll)     
 except for the Carbon Mountain Claim, there are no actions, suits,
proceedings, inquiries or investigations existing, pending or, to the best of
the Corporation’s knowledge, threatened against or adversely affecting any
Cardero Party or to which any of their property or assets is subject,
at Law or equity, or before or by any court, federal, provincial, state,
municipal or other Governmental Authority, commission, board, bureau, agency or
instrumentality, domestic or foreign and no Cardero Party is subject to any
judgment, order, writ, injunction, decree, award, rule, policy or regulation of
any Governmental Authority, which, either separately or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect; 

- 14 - 

(mm)      with
respect to the Project: 

	 	(i) 	
      the Guarantor is the legal owner, and the Carbon Creek
      Partnership and the Guarantor are, through the Carbon Creek Joint Venture
      Agreement, the beneficial owners, of the Peace River Coal Lease,
  and

	 	 	 
	 	(ii) 	
      the Guarantor is the legal owner, and the Carbon Creek
      Partnership and the Guarantor are, through the Carbon Creek Joint Venture
      Agreement, the beneficial owners, of the Coal
Licenses;

in each case free and clear of any
title defect or Security Interests other than Permitted Encumbrances, with
estimated proven and probable coal reserves and/or estimated coal resources as
set forth in, and subject to the terms of, the Prefeasibility Study. Carbon
Creek Partnership and the Guarantor, directly or through the Carbon Creek Joint
Venture Agreement, holds all coal rights required to continue the business and
operations of the Project as contemplated in the Prefeasibility Study and, other
than the issuance of leases under the Coal Act (British Columbia) in
respect of the Coal Licenses, no other rights to coal are necessary for the
operation of the Project as contemplated in the Prefeasibility Study. There is
no claim or the basis for any claim that might or could adversely affect the
right thereof to use, transfer or otherwise exploit such coal rights and no
Cardero Party has any responsibility or obligation to pay any commission,
royalty, licence fee or similar payment to any Person with respect to such coal
rights, except for: 

	 	(iii) 	
      payments to Carbon Creek Partnership as provided in the
      Carbon Creek Joint Venture Agreement,

	 	 	 
	 	(iv) 	
      payments to Peace River Partnership as provided in the
      Peace River Coal Lease, and

	 	 	 
	 	(v) 	
      payments to Governmental Authorities as required by the
      Coal Licenses, pursuant to the Mineral Tax Act (British Columbia)
      or otherwise as required by Applicable Laws;

(nn)      with respect to the
Project: 

	 	(i) 	
      pursuant to the Peace River Coal Lease, the Guarantor has
      the right to enter upon the Peace River Lands and use and occupy so much
      thereof as may be necessary for the purposes permitted under the Peace
      River Coal Lease,

- 15 - 

	 	(ii) 	
      the Guarantor is the legal owner, and the Carbon Creek
      Partnership and the Guarantor are, through the Carbon Creek Joint Venture
      Agreement, the beneficial owners, of the Coal Licenses, and

	 	 	 
	 	(iii) 	
      the Guarantor has in accordance with applicable laws the
      right to enter, occupy and use the surface area of the Coal Licenses for
      the purpose of exploring for and developing coal on the lands subject to
      the Coal Licenses,

and the Guarantor has all necessary
access rights and other necessary rights and interests relating to the Project
granting it the right and ability to: 

	 	(iv) 	
      explore for, develop and mine coal on the lands subject
      to the Peace River Coal Lease;

	 	 	 
	 	(v) 	
      explore for and develop coal on the lands subject to the
      Coal Licenses,

and each of such rights, and each of
the documents, agreements and instruments and obligations relating thereto
referred to above, is currently in good standing; 

(oo)      any
and all of the agreements and other documents and instruments pursuant to which
any Cardero Party holds the property and assets comprising the Project
(including any interest in, or right to earn an interest in, any property) are
valid and subsisting agreements, documents or instruments in full force and
effect, enforceable in accordance with the terms thereof, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and
other Laws relating to or affecting the rights of creditors generally and except
as limited by the application of equitable principles when equitable remedies
are sought, and by the fact that rights to indemnity, contribution and waiver,
and the ability to sever unenforceable terms, may be limited by Applicable Law.
No Cardero Party, or, to the knowledge of the Cardero Party’s, any party to such
agreements, documents or instruments, is in default of any of the provisions of
any such agreements, documents or instruments nor has any such default been
alleged, and such properties and assets comprising the Project are in good
standing under the applicable statutes and regulations of the jurisdictions in
which they are situated, all leases and licenses pursuant to which any Cardero
Party derives the interests thereof in the property and assets comprising the
Project are in good standing and there has been no default under any such lease
or licence and all taxes required to be paid with respect to such properties and
assets comprising the Project to the date hereof have been paid, except where
such taxes are being disputed in good faith. No part of the Project is subject
to any right of first refusal, or purchase or acquisition right other than as
expressly set out in the Carbon Creek Joint Venture Agreement in favour of the
parties thereto; 

(pp)      the
information, including the mineral reserve and resource information, set forth
in the Prefeasibility Study has been disclosed in accordance with NI 43-101, and
the method of estimating the mineral reserves and resources has been verified by
the authors thereof to current industry standards and the information upon which
the estimates of reserves and resources were based, was, at the time of delivery
thereof, complete and accurate in all material respects and
there have been no material changes to such information since the date of
delivery or preparation thereof; 

- 16 - 

(qq)      each
Cardero Party owns or has the right to use under license, sub-license or
otherwise all intellectual property used by it in its business, including
copyrights, industrial designs, trade marks, trade secrets, know how and
proprietary rights, free and clear of any and all encumbrances;

(rr)      the
operations of each Cardero Party are and have been conducted at all times in
compliance in all material respects with applicable financial recordkeeping and
reporting requirements of money laundering statutes of all jurisdictions, the
rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Authority
(collectively, the “Money Laundering Laws”) and no action, suit or
proceeding by or before any court or Governmental Authority, agency or body or
any arbitrator involving any Cardero Party with respect to the Money Laundering
Laws is pending, or to the best of the Corporation’s knowledge, threatened; 

(ss)      the
Corporation and the Guarantor have not, and to the best of the knowledge of the
Corporation or the Guarantor, no director, officer, agent, employee or other
person acting on behalf of the Corporation or the Guarantor has, taken any
action, directly or indirectly, that would result in a violation by such persons
of the anti-corruption legislation of Canada, the United States of America or
any other jurisdiction, or the rules and regulations thereunder, and all related
or similar rules, regulations or guidelines issued, administered or enforced by
any governmental agency thereof, including, without limitation, (i) making an
offer, payment or promise to pay or (ii) authorizing the payment of any money,
other property, gift, promise to give, or the giving of anything of value to any
official, employee or agent of any governmental agency, authority or
instrumentality in Canada, the United States of America or any other
jurisdiction where either the payment, gift or promise or the purpose of such
contribution, payment, gift or promise was, is or would be prohibited under
applicable Law, rule or regulation of Canada, the United States of America or
any other relevant jurisdiction or to any political party or official thereof or
any candidate for political office, where either the payment, gift or promise or
the purpose of such contribution, payment, gift or promise was, is or would be
prohibited under applicable Law, rule or regulation of Canada, the United States
of America or any other relevant jurisdiction; 

(tt)      the
Corporation used the aggregate principal amount of the Luxor Notes only toward
the uses set forth in section 7.1(a) of the Luxor Notes; and 

(uu)      the
representations and warranties made by the Corporation in this Subscription
Agreement, and in any document, written information, financial statement,
certificate, schedule or exhibit prepared and furnished by the Corporation or
the representatives of the Corporation pursuant hereto or in connection with the
transactions contemplated hereby (the “Transaction Disclosure Documents”)
do not contain and will not contain any untrue statement of a material fact, or
omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under which they were
furnished, it being acknowledged that if there is any inconsistency between two
or more documents comprising the Transaction Disclosure Documents regard shall
be had to the last delivered document. The Corporation has not withheld from or
failed to disclose to the Purchaser any material information relating to the
financial condition, property, assets, business or prospects of the Corporation
or any of the Subsidiaries. 

- 17 - 

SECTION 9 QUALIFIACTION

The representation and warranties contained in SECTION 8 to are
qualified to the extent required by:

	 	(a) 	
      the Luxor Demand, of which the Purchaser acknowledges it
      is fully aware;

	 	 	 
	 	(b) 	
      any violation of the terms of the Luxor Notes and Luxor
      Subscription Agreements caused by the execution and delivery by the
      Corporation or the Guarantor of any of the Subscription Agreement, the
      Senior Secured Notes, the Guarantee and the Security Documents or the
      completion of transactions or the execution and delivery of any other
      documents contemplated thereunder, of which the Purchaser acknowledges it
      is fully aware;

	 	 	 
	 	(c) 	
      any litigation threatened or allegations or claims made
      by Luxor in its press release dated August 6, 2013 of which the Purchaser
      acknowledges it is fully aware, or any allegations, claims or litigation
      that may result from the execution and delivery by the Corporation or the
      Guarantor of any of the Subscription Agreement, the Senior Secured Notes,
      the Guarantee and the Security Documents or the completion of transactions
      or the execution and delivery of any other documents contemplated
      thereunder; and

	 	 	 
	 	(d) 	
      any information disclosed by the Lender to the Purchaser
      prior to the date hereof.

SECTION 10 COVENANTS OF THE CORPORATION

For so long as the Note remains outstanding, the Corporation
hereby covenants to and in favour of and with the Purchaser that it will: 

(a)        fulfill all legal
requirements to permit the creation, issuance, offering and sale of the Note and
the issuance of the Warrants as contemplated in this Subscription Agreement
including, without limitation, compliance with applicable Securities Laws to
enable the Note to be sold to the Purchaser and the Warrants issued to the
Purchaser without the necessity of filing a prospectus, subject to the Purchaser
being an accredited investor under applicable Securities Laws; 

(b)        the Corporation
will use its best efforts to obtain Control Person Approval within 60 days from
date of the Control Person Approval Notice to enable the Warrants to be fully
exercisable by the Purchaser and to enable the issuance of all of the Warrant
Shares to the Purchaser upon due exercise of
the Warrants in accordance with the terms set forth in the Warrant Certificate;

- 18 - 

(c)        the Corporation will
use its best efforts to obtain approval for listing by the NYSE MKT of
any securities deliverable upon exercise of the Warrants within 30 days from the
Closing Date;

(d)        not incur or
permit the incurring of Debt equal or superior to the Purchaser’s priority,
whether direct or contingent, other than the Senior Secured Notes and the
Permitted Debt, without the advance written consent of the holder of the Note or
as provided for repayment in full of the Senior Secured Notes, plus interest, in
full; 

(e)        not grant or
permit the existence of any security for Debt of the Corporation other than the
Permitted Encumbrances, without the advance written consent of and on such terms
as are satisfactory to the holders of the Senior Secured Notes; 

(f)        not alter its
outstanding share capital by way of share split, consolidation or
reorganization, without the advance written consent of the holder of the Note;

(g)        only use the
net proceeds from the sale of the Note for the purposes set out therein, and
such other amount to be determined by the Corporation and the Purchaser in
writing from time to time; 

(h)        forthwith after
Closing, file such documents as may be required under applicable Securities Laws
relating to the private placement of the Note and the issuance of the Warrants
which, without limiting the generality of the foregoing, shall include Form
45-106F6 as prescribed by National Instrument 45-106 – Prospectus and
Registration Exemptions (or any replacement forms and legislation thereof)
together with any required fees; 

(i)        other than required
by applicable Securities Laws, not provide this form of agreement or the
instruments contemplated hereby (including, without limitation, the certificates
for the Note and/or Warrants) to any regulatory authority;

(j)        so long as the
Purchaser is the registered and beneficial holder of the Note and the Warrants,
the Corporation shall: 

	 	(i) 	
      preserve and maintain and cause its Subsidiaries to
      preserve and maintain their corporate existence and good standing in the
      jurisdiction of their incorporation and the rights, privileges and
      franchises of the Corporation and its Subsidiaries (except, in each case,
      in the event of a merger or consolidation in which the Corporation or any
      of its Subsidiaries, as applicable, is not the surviving entity) in each
      case where failure to so preserve or maintain could have an Material
      Adverse Effect;

	 	 	 
	 	(ii) 	
      comply in a timely manner with all its obligations under
      applicable Securities Laws; and

- 19 - 

	 	(iii) 	
      use its reasonable commercial efforts to maintain the
      listing and posting for trading of its Common Shares on the TSX or another
      North American stock exchange acceptable to the Purchaser, acting
      reasonably;

(k)      
 the Corporation shall use its reasonable commercial efforts and shall
cause its Subsidiaries to use their reasonable commercial efforts, to maintain
at all times all material licenses or permits necessary to the conduct of their
respective businesses and as required by any Governmental Agency or
instrumentality thereof;

(l)        as soon as
reasonably practicable following the date hereof, the Corporation shall use its
reasonable commercial efforts to obtain statements in writing from each the TSX
and NYSE MKT approving the issuance of the Warrants or Warrant Shares, as
applicable; 

(m)        neither the
Corporation nor the Purchaser shall make any press release or other publicity
about the terms of this Agreement or the transactions contemplated hereby
without the prior approval of the other unless otherwise required by applicable
Securities Laws or other Laws. Each Party shall provide the other Party with a
reasonable period of time to review and comment on all such press releases or
public statements prior to release thereof. The Parties agree to issue jointly
or concurrently with the other Parties a press release with respect to this
Agreement as soon as practicable, in a form acceptable to each Party. Each of
the Parties agrees not to make any public statement that is inconsistent with
such press release (other than to the extent superseded by a subsequent press
release or public filing). The foregoing obligation is subject to applicable
Law; 

(n)        subject to any
required approvals of the Exchanges, the Corporation shall appoint Robert Kopple
to its board of directors (the “Board”) in accordance with section 14.8
of the Articles of the Company at such time as Mr. Kopple determines and will at
that time invite Mr. Kopple to act as chairman of the Board; and 

(o)        fulfill and
comply with all of the covenants expressed in the Note or the other Transaction
Documents. 

SECTION 11 RELIANCE UPON REPRESENTATIONS,
WARRANTIES AND COVENANTS OF CORPORATION 

The Corporation acknowledges that its representations and
warranties and covenants contained in this Subscription Agreement are made with
the intent that they may be relied upon by the Purchaser in purchasing the Note
and Warrants hereunder. 

SECTION 12 DELIVERIES

(a)        Concurrently
herewith, and as a condition of Closing in favour of the Purchaser, the
Corporation shall deliver the following documents to the Purchaser: 

	 	(i) 	
      certificates dated the Closing Date, signed by
      appropriate officers of the Corporation and the Guarantor, addressed to
      the Purchaser and its counsel, with respect to their Constating Documents,
      all resolutions of their directors and other corporate action relating to this
      Subscription Agreement and the Transaction Documents and to the creation,
      allotment, issuance of the Note and Warrants, the reservation and
      allotment of the Warrant Shares and with respect to such other matters as
  the Purchaser may reasonably request;

- 20 - 

	 	(ii) 	
      the Transaction Documents;

	 	 	 
	 	(iii) 	
      the receipt by the Corporation of all approvals and
      consents reasonably required by the Purchaser, in form and substance
      reasonably satisfactory to the Purchaser; and

	 	 	 
	 	(iv) 	
      such other documents (including, without limitation, the
      documents referred to in SECTION 4 above) as the Purchaser may reasonably
      request.

(b)        Within two business
days following the Closing Date, the Corporation shall deliver a favourable
legal opinions, in form and substance satisfactory to the Purchaser, acting
reasonably, dated the Closing Date, from counsel to the Corporation and the
Guarantor in all applicable jurisdictions, addressing, among other things
(without limitation): 

	 	(i) 	
      the due authorization of the Transaction Documents, the
      Warrants being duly and validly created and issued, the Warrant Shares,
      when issued, being validly issued as fully paid and non-assessable Common
      Shares, the prospectus-exempt nature of the issuance of the Note and
      Warrants and the first trade of the Warrants and Warrant Shares, subject
      to customary qualifications, assumptions and reliances and the
      authenticity of all signatures of all individuals; and

	 	 	 
	 	(ii) 	
      title to the interest of P. Burns Peace River Resources
      Corporation in any coal in or under the Peace River Lands and the Peace
      River Coal Lease.

SECTION 13 COSTS 

All reasonable fees and disbursements of counsel for the
Corporation and all reasonable fees and disbursements (plus all applicable
taxes) of counsel for the Purchaser relating to the documents and transactions
contemplated herein shall be borne and paid by the Corporation as contemplated
by SECTION 3. 

SECTION 14 KNOWLEDGE 

Where any representation or warranty contained in this
Subscription Agreement is expressly qualified by reference to the knowledge of a
Person, it shall be deemed to refer to the knowledge after due and diligent
enquiry of such Persons (including appropriate officers) as it reasonably
considers necessary or prudent to make such representations and warranties. All
provisions contained herein which are qualified by or require any Person to make
a determination or assessment of any event or circumstance or other matter to
its knowledge shall be deemed to require such Person to make all due inquiries and
investigations as may be necessary or prudent in the circumstances before making
any such determination or assessment. 

- 21 - 

SECTION 15 GOVERNING LAW 

This Subscription Agreement is exclusively (without regard the
any rules or principles relating to conflicts of Laws) governed by and enforced
in accordance with the Laws of the Province of British Columbia and the federal
Laws of Canada applicable therein. Each of the parties hereto hereby irrevocably
attorns to the non-exclusive jurisdiction of the courts of the Province of
British Columbia. 

SECTION 16 ASSIGNMENT 

This Subscription Agreement is not transferable or assignable
by Corporation and may only be assigned by the Purchaser to any assignee of the
Note in accordance with the terms thereof. 

SECTION 17 FACSIMILE SUBSCRIPTION,
COUNTERPARTS 

The Corporation shall be entitled to rely on delivery by
facsimile of an executed copy of this Subscription Agreement and acceptance by
the Corporation of that delivery shall be legally effective to create a valid
and binding agreement between the parties in accordance with the terms of this
Subscription Agreement. This Subscription Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same document. 

SECTION 18 INDEMNIFICATION, TERMINATION AND
DAMAGES 

(a)         Survival of
Representations, Warranties and Covenants. The representations and
warranties and covenants of the Corporation and the Purchaser contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing Date and shall continue in full force and effect for a
period of two years from the date on which the Note ceases to be outstanding and
all Obligations have been indefeasibly repaid and performed in full; provided,
however that: 

	 	(i) 	
      the representations and warranties of the Corporation
      contained in SECTION 8(a), SECTION 8(b), SECTION 8(c), SECTION 8(d),
      SECTION 8(e), SECTION 8(n), SECTION 8(q), SECTION 8(mm), SECTION 8(nn) and
      SECTION 8(oo) shall survive indefinitely; and

	 	 	 
	 	(ii) 	
      the representations and warranties of the Corporation
      contained in SECTION 8(ee) and SECTION 8(ff) shall survive for a period of
      60 days following the expiration of the associated statutory
  period.

	 		
      The Corporation’s and the Purchaser’s warranties and
      representations shall in no way be affected by any investigation of the
      subject matter thereof made by or on behalf of the Corporation or the
      Purchaser.

	 	 	 
	 	(b) 	
      Indemnification

- 22 - 

	 	(i) 	
      The Corporation agrees to indemnify and hold harmless the
      Purchaser, its Affiliates, each of their officers, directors, employees
      and agents and their respective successors and assigns, from and against
      any losses, damages, or expenses which are caused by or arise out of (A)
      any breach or default in the performance by the Corporation of any
      covenant or agreement made by the Corporation in this Agreement or in any
      of the Transaction Documents, (B) any breach of warranty or representation
      made by the Corporation in this Agreement or in any of the Transaction
      Documents, and (C) any and all third party actions, suits, proceedings,
      claims, demands, judgments, costs and expenses (including reasonable legal
      fees and expenses) incidental to any of the foregoing.

	 	 	 
	 	(ii) 	
      The Purchaser agrees to indemnify and hold harmless the
      Corporation, its Affiliates, each of their officers, directors, employees
      and agents and their respective successors and assigns, from and against
      any losses, damages, or expenses which are caused by or arise out of (A)
      any breach or default in the performance by the Purchaser of any covenant
      or agreement made by the Purchaser in this Agreement or in any of the
      Transaction Documents, (B) any breach of warranty or representation made
      by the Purchaser in this Agreement or in any of the Transaction Documents,
      and (C) any and all third party actions, suits, proceedings, claims,
      demands, judgments, costs and expenses (including reasonable legal fees
      and expenses) incidental to any of the foregoing.

(c)        Indemnity
Procedure. A Party agreeing to be responsible for or to indemnify against
any matter pursuant to this Agreement is referred to herein as the
“Indemnifying Party” and the other Party claiming indemnity is referred
to as the “Indemnified Party.” An Indemnified Party under this Agreement
shall, with respect to claims asserted against such Party by any third party,
give written notice to the Indemnifying Party of any liability which might give
rise to a claim for indemnity under this Agreement within 60 Business Days of
the receipt of any written claim from any such third party, but not later than
20 days prior to the date any answer or responsive pleading is due, and with
respect to other matters for which the Indemnified Party may seek
indemnification, give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
materially prejudiced. 

- 23 - 

The Indemnifying Party shall have the
right, at its election, to take over the defense or settlement of such claim by
giving written notice to the Indemnified Party at least 15 days prior to the
time when an answer or other responsive pleading or notice with respect thereto
is required. If the Indemnifying Party makes such election, it may conduct the
defense of such claim through counsel of its choosing (subject to the
Indemnified Party’s approval of such counsel, which approval shall not be
unreasonably withheld), shall be solely responsible for the expenses of such
defense and shall be bound by the results of its defense or settlement of the
claim. The Indemnifying Party shall not settle any such claim without prior notice to and
consultation with the Indemnified Party, and no such settlement involving any
equitable relief or which might have an adverse effect on the Indemnified Party
may be agreed to without the written consent of the Indemnified Party (which
consent shall not be unreasonably withheld). So long as the Indemnifying Party
is diligently contesting any such claim in good faith, the Indemnified Party may
pay or settle such claim only at its own expense and the Indemnifying Party will
not be responsible for the fees of separate legal counsel to the Indemnified
Party, unless the named Parties to any proceeding include both Parties or
representation of both Parties by the same counsel would be inappropriate due to
conflicts of interest or otherwise. If the Indemnifying Party does not make such
election, or having made such election does not, in the reasonable opinion of
the Indemnified Party proceed diligently to defend such claim, then the
Indemnified Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of and proceed
to handle such claim in its discretion and the Indemnifying Party shall be bound
by any defense or settlement that the Indemnified Party may make in good faith
with respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim. The Parties agree to cooperate in
defending such third party claims and the Indemnified Party shall provide such
cooperation and such access to its books, records and properties as the
Indemnifying Party shall reasonably request with respect to any matter for which
indemnification is sought hereunder; and the Parties hereto agree to cooperate
with each other in order to ensure the proper and adequate defense thereof. 

(d)        With regard to
claims of third parties for which indemnification is payable hereunder, such
indemnification shall be paid by the Indemnifying Party upon the earlier to
occur of: (i) the entry of a judgment against the Indemnified Party and the
expiration of any applicable appeal period, or if earlier, five days prior to
the date that the judgment creditor has the right to execute the judgment; (ii)
the entry of an unappealable judgment or final appellate decision against the
Indemnified Party; or (iii) a settlement of the claim. Notwithstanding the
foregoing, the reasonable expenses of counsel to the Indemnified Party shall be
reimbursed on a current basis by the Indemnifying Party. With regard to other
claims for which indemnification is payable hereunder, such indemnification
shall be paid promptly by the Indemnifying Party upon demand by the Indemnified
Party. 

SECTION 19 TAX

The Purchaser represents and warrants that the Purchaser is and
will remain a resident of the United States and a “qualifying person” for
purposes of the Canada-US Income Tax Convention (1980), as amended (the “US
Tax Treaty”), and the Purchaser shall complete, sign and deliver to the
Corporation, as soon as possible but in any case no later than 30 days prior to
the first payment of interest due under the Senior Secured Notes, Canada Revenue
Agency Forms NR 301 and NR 302 and such other documents as may be required to
confirm the entitlement of the Purchaser to the benefits of Article XI(i) of the
US Tax Treaty. 

- 24 - 

SECTION 20 ENTIRE AGREEMENT 

This Subscription Agreement and the other Transaction Documents
and any and all other documents ancillary thereto and executed and delivered in
connection therewith, constitute the entire agreement between the parties hereto
with respect to the subject matter hereof. 

[Remainder of Page Intentionally Left Blank.]

- 25 - 

ACCEPTANCE AND AGREEMENT 

The above-mentioned Subscription Agreement is hereby accepted
and agreed to by CARDERO RESOURCE CORP. 

DATED at Vancouver, the • day of August, 2013. 

CARDERO RESOURCE CORP. 

 

	 	By: 	 
    
	 	 	Name: 
	 	 	Authorized Signing Officer 

The undersigned hereby acknowledges and confirms the provisions
of the above-mentioned Subscription Agreement with effect as of the date first
referred to above. 

CARDERO COAL LTD. 

 

	 	By:	 
       
	 	 	Name: 
	 	 	Title: 
	 	 	Authorized Signing Officer

- 26 - 

EXHIBIT "A" 
DEFINED TERMS 

Unless otherwise defined herein, the following terms used in
the Subscription Agreement have the following meanings: 

(a)      
 “Affiliate” has the meaning attributed to that term in the TSX
Company Manual;

(b)      
 “Associate” has the meaning attributed to that term in the TSX
Company Manual; 

(c)       
“Authorization” means any authorization, consent, approval, resolution,
licence, exemption, filing, notarization or registration; 

(d)        “BMO” means
Bank of Montreal; 

(e)        “BMO
Mastercard” means the corporate credit card issued to the Guarantor by BMO
having a credit limit of $25,000; 

(f)        “BMO
Security” means the $28,750 cash collateral guaranteed investment
certificate pledged by the Borrower as security to BMO to secure the advances
made pursuant to the BMO Mastercard; 

(g)      
 “Business Day” means a day other than a Saturday, Sunday or any
other day on which Canadian chartered banks located in the City of Vancouver,
Province of British Columbia are not open for business;

(h)        “Carbon Creek
Joint Venture Agreement” means the Carbon Creek joint venture agreement
dated as of June 15, 2010, between Carbon Creek Partnership and the Guarantor
(formerly Coalhunter Mining Corporation), as amended by a letter agreement dated
December 22, 2010 and an amending agreement made April 14, 2011; 

(i)         “Carbon
Creek Partnership” means Carbon Creek Partnership, a general partnership
formed under the laws of the Province of Alberta on June 15, 2010, between P.
Burns Carbon Creek Coal Corporation and P. Burns Partners Limited, registered
under no. PT15425069, having an office at [Redacted];

(j)         “Carbon
Mountain” means Carbon Mountain Drilling & Water Services Ltd.; 

(k)      
 “Carbon Mountain Claim” means the notice of civil claim brought by
Carbon Mountain in the Supreme Court of British Columbia against the Borrower
alleging indebtedness, failure to compensate or breach of contract in connection
with surface drilling and coring services supplied by Carbon Mountain to the
Borrower and seeking relief in the amount of $770,393.48 plus damages, interests
and costs; 

(l)         “Cardero
Parties” means, together, the Corporation, the Guarantor and each of their
respective direct and indirect Subsidiaries and “Cardero Party” means
either one of them; 

- 27 - 

	 	(m) 	
      “Change of Control” has the meaning ascribed
      thereto in the Note;

	 	 	 
	 	(n) 	
      “Closing” has the meaning attributed thereto in
      SECTION 4;

	 	 	 
	 	(o) 	
      “Closing Date” has the meaning ascribed thereto in
      SECTION 4;

	 	 	 
	 	(p) 	
      “Closing Time” has the meaning ascribed thereto in
      SECTION 4;

	 	 	 
	 	(q) 	
      “Coal Licenses” has the meaning ascribed thereto
      in the Note;

	 	 	 
	 	(r) 	
      “Common Shares” means the common shares in the
      capital of the Corporation;

	 	 	 
	 	(s) 	
      “Constating Documents”
means:

	 	(i) 	
      with respect to a corporation, its articles of
      incorporation, amalgamation or continuance or other similar documents and
      its by-laws; and

	 	 	 
	 	(ii) 	
      with respect to any other Person which is not a natural
      person, whether with or without legal personality, the organization and
      governance documents of such Person,

in each case as amended or
supplemented from time to time; 

(t)      
 “Corporation” means Cardero Resource Corp. or its successors and
assigns; 

(u)      
 “Disclosure Record” means all information circulars, prospectuses
(including preliminary prospectuses), annual information forms, offering
memoranda, financial statements, technical reports, material change reports and
news releases filed with the Exchanges and all securities regulatory authorities
in each Reporting Jurisdiction on or during the 12 months preceding the date
hereof; 

(v)      
 “Debt” has the meaning ascribed thereto in the Note; 

(w)      
 “Environmental Law” means all applicable federal, provincial,
state, municipal or local statutes, regulations, by-laws, permits, licences,
approvals, consents, authorizations, certificates, orders or rules, and any
policies or guidelines of any governmental or regulatory body or agency, and any
requirements or obligations arising under the common law, relating to the
Environment, the transportation of dangerous goods and occupational health and
safety whatsoever; 

(x)      
 “Exchange Act” shall mean the U.S. Securities Exchange Act of 1934,
as amended;

(y)      
 “Exchanges” means the TSX and the NYSE MKT; 

(z)      
 “Governmental Authority” shall mean any supranational,
national, federal, state, provincial, regional, tribal, provincial, local or
municipal administrative, judicial, legislative, executive, regulatory, police
or taxing government or governmental or quasi-governmental authority of any
nature, including any agency, branch, bureau, department, commission, official or entity, or any
court, arbitrator or other tribunal, whether domestic or foreign; 

- 28 - 

(aa)    
 “Guarantee” has the meaning ascribed thereto in the Note; 

(bb)    
 “Guarantor” has the meaning ascribed thereto in the Note; 

(cc)     
“Hazardous Material” means (i) any petroleum or petroleum products,
asbestos in any form or condition, urea, formaldehyde foam insulation and
polychlorinated biphenyls (PCBs), (ii) any other chemicals, materials,
substances or wastes that are now or hereafter become defined as or included in
the definition of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic
substances,” “toxic pollutants” or words of similar import under any
Environmental Law, and (iii) any other chemicals, materials, substances or
wastes, exposure to which is prohibited, limited or regulated by any
Governmental Authority under any Environmental Law or with respect to which
liability or standards of conduct are imposed under any Environmental Law; 

(dd)     
“IFRS” has the meaning ascribed thereto in the Note; 

(ee)     
“Investments” shall mean, with respect to any Person, all advances, loans
or extensions of credit to any other Person, all purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any other investment in any other Person, including partnerships or
joint ventures (whether by capital contribution or otherwise) or other similar
arrangement (whether written or oral) with any Person, including but not limited
to arrangements in which (i) the Person shares profits and losses, (ii) any such
other Person has the right to obligate or bind the Person to any third party, or
(iii) the Person may be wholly or partially liable for the debts or obligations
of such partnership, joint venture or other arrangement; 

(ff)     
 “John Deere Lease” has the meaning ascribed thereto in the
Note;

(gg)    
 “Laws” shall mean all federal, state, provincial or local or
foreign laws, constitutions, statutes, codes, rules, common law, regulations,
ordinances, executive orders, decrees or edicts (to the extent such edicts have
the force of law) by a Governmental Authority, including without limitation
Securities Laws; 

(hh)    
 “Luxor” means collectively, Luxor Capital Partners, LP, Luxor
Capital Partners Offshore Master Fund, LP, Luxor Wavefront, LP and OC 19 Master
Fund, L.P. – LCG; 

(ii)     
 “Luxor Demand” means the demands for payment dated July 24, 2013
and delivered to the Corporation, and to the Guarantor pursuant to the Luxor
Guarantee, with respect to the outstanding indebtedness owned under the Luxor
Notes, and the accompanying notice of intention to enforce a security issued
under section 244 of the Bankruptcy and Insolvency Act (Canada);

- 29 - 

(jj)     
“Luxor Guarantee” means the guarantee date April 22, 2013 between the
Guarantor and Luxor pursuant to which, among other things, the Guarantor
guaranteed the obligations of the Corporation under the Luxor Notes; 

(kk)     
“Luxor Notes” means the senior secured notes of the Corporation dated
April 22, 2013 issued to Luxor having an aggregate principal amount of
$5,500,000; 

(ll)       “Luxor Subscription
Agreements” mean the subscription agreements entered into between Luxor and
the Corporation dated April 22, 2013 for the purchase of the Luxor Notes; 

(mm)    “Material
Adverse Effect” means, when used with reference to any event or
circumstance, any event or circumstance which has had or could reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on: 

	 	(i) 	
      the business, operations, results of operations, assets,
      liabilities, condition (financial or otherwise) of the Project or any
      Cardero Party;

	 	 	 
	 	(ii) 	
      the ability of any Cardero Party to observe or perform
      its obligations under this Subscription Agreement or any of the other
      Transaction Documents in accordance with the terms hereof and
    thereof;

	 	 	 
	 	(iii) 	
      the validity or enforceability of this Subscription
      Agreement or any other Transaction Document;

	 	 	 
	 	(iv) 	
      any rights or remedies of the Purchaser under this
      Subscription Agreement or any other Transaction Document; or

	 	 	 
	 	(v) 	
      the priority or ranking of any Security Interest granted
      pursuant to the Security Documents or any of the rights or remedies of the
      holders of the Senior Secured Notes thereunder;

(nn)    
 “NI 43-101” means National Instrument 43-101 - Standards of
Disclosure for Mineral Projects; 

(oo)    
 “Note” means the Senior Secured Note of the Corporation purchased
by the Purchaser in the form of Exhibit “B”;

(pp)     
“NYSE MKT” means NYSE MKT LLC; 

(qq)    
 “Obligations” has the meaning ascribed thereto in the Note; 

(rr)    
 “Peace River Coal Lease” means the coal lease made as of June 15,
2010 granted by Peace River Partnership in favour of the Borrower pursuant to
the terms of the Peace River Coal Lease Option Agreement; 

(ss)    
 “Peace River Coal Lease Option Agreement” means the coal lease
option agreement dated as of June 15, 2010 between Peace River Partnership and
the Borrower (formerly Coalhunter Mining
Corporation), as amended by letter agreement dated December 22, 2010; 

- 30 - 

(tt)        “Peace River
Lands” means the fee simple lands and undersurface rights situated in the
Peace River District of the Province of British Columbia, registered in the name
of P. Burns Peace River Resources Corporation and beneficially owned by the
Peace River Partnership more particularly described in Exhibit “C” hereto; 

(uu)     
“Peace River Partnership” means Peace River Partnership, a general
partnership formed under the laws of the Province of Alberta on June 15, 2012,
between P. Burns Peace River Resources Corporation and P. Burns Partners
Limited, registered under no. PT15424963, having an office at [Redacted]; 

(vv)     
“Permitted Debt” has the meaning ascribed thereto in the Note; 

(ww)    
 “Permitted Encumbrances” has the meaning ascribed thereto in the
Note; 

(xx)        “Person” has
the meaning ascribed thereto in the Note; 

(yy)     
 “Prefeasibility Study” means the technical report dated November 6,
2012, prepared in accordance with NI 43-101 and entitled “Technical Report –
Prefeasibility Study of the Carbon Creek Coal Property, British Columbia,
Canada” by Larry Messinger, John Lewis and Larry Henchel of Norwest Corporation
as filed on SEDAR on November 7, 2012; 

(zz)     
 “Project” has the meaning ascribed thereto in the Note; 

(aaa)  
  “Purchaser” means Kopple Family Partnership, L.P. or its
successors and assigns; 

(bbb)    “Reporting
Jurisdictions” means all of the jurisdictions in Canada in which the
Corporation is a “reporting issuer” (being, as of the date hereof, British
Columbia, Alberta and Ontario); 

(ccc)    “Securities
Act” shall mean the U.S. Securities Act of 1933, as amended; (ddd)
“Securities Laws” has the meaning ascribed thereto in SECTION 8; (eee)
“Security Documents” has the meaning ascribed thereto in the Note; 

(fff)    “Security
Interest” means any security interest, assignment by way of security,
mortgage, charge (whether fixed or floating), hypothec, deposit arrangement,
pledge, lien, encumbrance, preference, priority or other security interest or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement, and any financing lease
having substantially the same economic effect as any of the foregoing); 

(ggg)    “Senior
Secured Notes” has the meaning ascribed thereto in the Note; 

- 31 - 

(hhh)    
“Subsidiaries” and “Subsidiary” have the meanings ascribed thereto
in the Note; 

(iii)        “Transaction
Documents” has the meaning ascribed thereto in the Note; 

(jjj)        “TSX” means
the Toronto Stock Exchange; 

(kkk)    
“Warrant Certificate” means the certificate representing the Warrants;
and 

(lll)        “Warrants”
has the meaning attributed thereto in SECTION 2. 

- 32 - 

EXHIBIT "B" 
FORM OF SENIOR SECURED NOTE

- 33 - 

EXHIBIT "C" 
PEACE RIVER LANDS 

A.         FEE
SIMPLE LANDS 

	  	Legal
      Description: 	 	Crown Grant Document Number: 
	  	 	 	  
	1. 	Parcel Identifier: 016-907-361,
      District Lot 319, Peace River District, except Plans PGP 35925 and PGP
      40024 	 	8212/953 
	  	 	 	  
	2. 	Parcel Identifier: 016-907-621,
      District Lot 320, Peace River District, except Plans PGP 35925 and PGP
      40024 	 	8213/953 
	  	 	 	  
	3. 	Parcel Identifier: 016-908-562,
      District Lot 321, Peace River District, except Plans PGP 35924 and PGP
      35925 	 	8214/953 
	  	 	 	  
	4. 	Parcel Identifier: 016-909-119,
      District Lot 322, Peace River District, except Plans PGP 35925 and PGP
      40024 		8215/953 
	  	 	 	  
	5. 	Parcel Identifier: 007-846-762,
      District Lot 323, Peace River District, except Plans PGP 40023 		9185/962 
	  	 	 	  
	6. 	Parcel Identifier: 016-909-194,
      District Lot 324, Peace River District, except Plans PGP 35923 and PGP
      40023 		9187/962 
	  	 	 	  
	7. 	Parcel Identifier: 016-909-216,
      District Lot 325, Peace River District, except Plans PGP 35923, PGP 35925,
      PGP 40022 and PGP 40023 		8216/953 
	  	 	 	  
	8. 	Parcel Identifier: 007-846-827,
      District Lot 326, Peace River District 		8217/953 
	  	 	 	  
	9. 	Parcel Identifier: 006-566-847,
      District Lot 327, Peace River District 		9186/962 
	  	 	 	  
	10. 	Parcel Identifier: 007-846-835,
      District Lot 328, Peace River District 		8218/953

- 34 - 

B.        
UNDERSURFACE RIGHTS 

	Undersurface 	Parcel Identifier 	Legal Description 
	Rights Reg.No. 	No. 	 
	 	 	 
	PG6990 	018-141-633 	That part of DL
      325 Peace River District as shown on Plan PGP35925 
	 	 	 
	PG6993 	018-141-641 	That part of DL
      325 Peace River District as shown on Plan PGP35923 
	 	 	 
	PG6995 	018-141-650 	That part of DL
      322 Peace River District as shown on Plan PGP35925 
	 	 	 
	PG6997 	018-141-676 	That part of DL
      320 Peace River District as shown on Plan PGP35925 
	 	 	 
	PG7000 	018-141-668 	That part of DL
      319 Peace River District as shown on Plan PGP35925 
	 	 	 
	PG7002 	018-141-684 	That part of DL
      321 Peace River District as shown on Plan PGP35924 
	 	 	 
	PG7005 	018-141-692 	That part of DL
      321 Peace River District as shown on Plan PGP35925 
	 	 	 
	PG7007 	018-141-706 	That part of DL
      324 Peace River District as shown on Plan PGP35923 
	 	 	 
	PG7010 	018-141-714 	That part of DL
      324 Peace River District as shown on Plan PGP35925 
	 	 	 
	PK28804 	023-492-198 	Pcl 1 DL 325
      Peace River District Plan PGP40022 
	 	 	 
	PK28805 	023-492-589 	Pcl 3 DL 325
      Peace River District Plan PGP40023 
	 	 	 
	PK28806 	023-492-546 	Pcl 1 DL 323
      Peace River District Plan PGP40023 
	 	 	 
	PK28807 	023-492-571 	Pcl 2 DL 324
      Peace River District Plan PGP40023 
	 	 	 
	PK28808 	023-492-058 	Pcl 1 DL 319
      Peace River District Plan PGP40024 
	 	 	 
	PK28809 	023-492-066 	Pcl 2 DL 320
      Peace River District Plan PGP40024 
	 	 	 
	PK28810 	023-492-074 	Pcl 3 DL 322
      Peace River District Plan PGP40024

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00230-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00230-of-00352.parquet"}]]