SUBSCRIPTION AGREEMENT
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DATED FOR REFERENCE: July 6, 2005
TO: ENTREE GOLD INC.
FROM: KENNECOTT CANADA EXPLORATION INC.
RE: SUBSCRIPTION AND PURCHASE OF 641,191 UNITS OF ENTREE GOLD INC.
The undersigned (the "Purchaser") hereby subscribes for and agrees to purchase
from Entree Gold Inc. (the "Company"), subject to the terms and conditions set
forth in this subscription agreement (the "Subscription Agreement"), the number
of units (individually a "Security" and collectively the "Securities") of the
Company, each Security comprised of a common share and two non-transferable
(except as permitted) common share purchase warrants (one share purchase warrant
A and one share purchase warrant B), set forth in paragraph E below for an
aggregate subscription price set forth in paragraph G below, representing a
subscription price of CDN$2.20 per Security.
A. NAME AND ADDRESS OF PURCHASER: The name and address of the Purchaser is as
follows:
Name: Kennecott Canada Exploration Inc.
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Address: 000 Xxxxxxxxx Xxxxxx, Xxxxx 000
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Vancouver, British Columbia
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V6C 1S4
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B. NAME AND ADDRESS OF BENEFICIAL PURCHASER: The name(s) and address(es) of any
beneficial purchaser(s) for whom the Purchaser is purchasing as agent or trustee
are set forth below (or, if additional space is needed, are set forth in an
attachment hereto):
Name:
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Address:
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C. REGISTRATION INSTRUCTIONS: The name(s) and address(es) of the person(s) in
whose name(s) the Purchaser's Securities are to be registered, if other than as
set forth in paragraph A above, are as follows (or, if additional space is
needed, are set forth in an attachment hereto):
Name:
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Address:
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D. DELIVERY INSTRUCTIONS: The name and address of the person to whom the
certificates representing the Purchaser's Securities are to be delivered, if
other than as set forth in paragraph A above, is as follows:
Name:
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Address:
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E. NUMBER AND DESCRIPTION OF SECURITIES: The total number of Securities
subscribed for under this Subscription Agreement is:
641,191 Securities. Each Security consists of one common share in the
capital of the Company and two non-transferable (except as permitted)
common share purchase warrants (one share purchase warrant A and one
share purchase warrant B). Two share purchase warrants A will entitle
the warrant holder to purchase one common share of the Company at a
price of CDN$2.75 for a period of two years following the closing of
the private placement, and two share purchase warrants B will entitle
the warrant holder to purchase one common share of the Company at a
price of CDN$3.00 for a period of two years following the closing of
the private placement.
F. PRICE PER SECURITY: CDN$2.20.
G. AMOUNT OF SUBSCRIPTION FUNDS: The total subscription amount (the "Purchaser's
Subscription Funds") for the Securities subscribed for under this Subscription
Agreement is:
CDN$1,410,620.20
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(# of Securities x CDN$2.20)
H. CORPORATE PLACEE REGISTRATION FORM: The Purchaser must have a current
Corporate Placee Registration Form on file with TSX Venture Exchange. Please
check one of the following boxes:
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The Purchaser has filed a Corporate Placee Registration Form with TSX
Venture Exchange and it is still current............................|X|
I. OWNERSHIP INTEREST: The number of securities in the Company (not including
this subscription) held by the Purchaser either directly or indirectly is as
follows:
Number: 5,665,730
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Type of Security: Units (having the same composition as the Securities
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subscribed for under this Subscription Agreement.
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J. TELEPHONE NUMBER OF PURCHASER: x00 (0) 000 000 0000
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K. E-MAIL ADDRESS OF PURCHASER: Xxx.Xxxxx@xxxxxxxx.xxx
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BY EXECUTING THIS SUBSCRIPTION AGREEMENT, THE PURCHASER CERTIFIES THAT THE
PURCHASER IS RESIDENT IN THE JURISDICTION SHOWN IN PARAGRAPH A ABOVE AND, IF THE
PURCHASER IS ACTING AS TRUSTEE OR AGENT FOR A BENEFICIAL PURCHASER OF THE
SECURITIES, THE BENEFICIAL PURCHASER IS RESIDENT IN THE JURISDICTION SHOWN IN
PARAGRAPH B ABOVE.
IN WITNESS WHEREOF the Purchaser has duly executed this Subscription Agreement
as of the date first written above.
Kennecott Canada Exploration Inc.
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Name of the Purchaser
By:
/s/ Xxxxxxx X. Xxxxx
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Signature of Purchaser
Xxxxxxx X. Xxxxx
Authorized Representative
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Title (if applicable)
ACCEPTANCE
The above mentioned Subscription Agreement is hereby accepted by and agreed to
by the Company this 6th day of July 2005.
ENTREE GOLD INC.
By:
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Authorized Signatory
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NOTE: THE INFORMATION COLLECTED HEREIN WILL BE USED BY THE COMPANY IN
DETERMINING WHETHER THE PURCHASER MEETS THE REQUIREMENTS FOR THE APPLICABLE
PROSPECTUS EXEMPTIONS, FOR MAKING CERTAIN FILINGS WITH THE APPLICABLE REGULATORY
AUTHORITIES AND FOR MEETING ITS REQUIREMENTS UNDER SECURITIES LEGISLATION WITH
RESPECT TO THE MAILING OF CONTINUOUS DISCLOSURE MATERIALS OF THE COMPANY TO THE
PURCHASER. BY SIGNING THIS SUBSCRIPTION AGREEMENT, THE PURCHASER AND ANY
DISCLOSED PRINCIPAL FOR WHOM THE PURCHASER IS ACTING HEREBY CONSENTS TO THE
COLLECTION AND USE OF ALL OF THE PURCHASER'S OR THE DISCLOSED PRINCIPAL'S
PERSONAL INFORMATION CONTAINED HEREIN BY THE COMPANY FOR THE ABOVE REFERENCED
PURPOSES.
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TERMS AND CONDITIONS FOR SUBSCRIPTION OF
SECURITIES OF ENTREE GOLD INC. DATED JULY 6, 2005
1. DEFINITIONS
1.1 In this Subscription Agreement, including any schedules forming a part of
this Subscription Agreement:
(a) "Accredited Investor" has the same meaning given to that term in
Multilateral Instrument 45-103;
(b) "Affiliate" means any person, partnership, limited liability
company, joint venture corporation, or other form of enterprise
which Controls, is Controlled by, or is under common Control with
the Purchaser;
(c) "Applicable Securities Laws" means, in respect of the offer and
sale of Securities, the securities legislation having application
and the rules, policies, notices and orders issued by Regulatory
Authorities having application;
(d) "B.C. Act" means the Securities Act (British Columbia), R.S.B.C.
1996, c.418, as amended;
(e) "Closing Date" has the meaning given to that term in section 9.1;
(f) "Closing" has the meaning given to that term in section 9.1;
(g) "Common Share" means a common share of the Company and "Common
Shares" means more than one Common Share;
(h) "Control" used as a verb means, when used with respect to an
entity, the ability, directly or indirectly through one or more
intermediaries, to direct or cause the direction of the management
and policies of such entity through the legal or beneficial
ownership of voting securities or membership interests, the right
to appoint managers, directors or corporate officers, rights
arising under operating agreements or other contracts, a voting
trust or otherwise; and, when used with respect to a person, means
the actual or legal ability to control the actions of another,
through family relationship, agency, contract or otherwise; and
"Control" used as a noun means an interest which gives the holder
the ability to exercise any of the foregoing powers;
(i) "Distribution" has the meaning given to that term under Applicable
Securities Laws;
(j) "Equity Participation Agreement" means the Equity Participation
Agreement dated June 17, 2005 between the Company and the
Purchaser;
(k) "Exchange" means the TSX Venture Exchange;
(l) "Exchange Policies" means the policies of the Exchange;
(m) "Exemptions" means the exemptions from the registration and
prospectus or equivalent requirements under Applicable Securities
Laws;
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(n) "fully managed" in relation to an account, means that the
Purchaser makes the investment decision for the account and has
the full discretion to purchase or sell for the account without
requiring the client's express consent to the transaction;
(o) "Material Fact" has the meaning given to that term under
Applicable Securities Laws;
(p) "Multilateral Instrument 45-102" means Multilateral Instrument
45-102 Resale of Securities of the Canadian Securities
Administrators;
(q) "Multilateral Instrument 45-103" means Multilateral Instrument
00-000 Xxxxxxx Raising Exemptions which has been adopted in
British Columbia;
(r) "Private Placement" means the offering and sale of the Securities
pursuant to the terms and conditions of this Subscription
Agreement;
(s) "Purchaser's Securities" means the number of Securities subscribed
for by the Purchaser under this Subscription Agreement as
specified in paragraph E of this Subscription Agreement;
(t) "Purchaser's Subscription Funds" means the aggregate subscription
price for the Purchaser's Securities as specified and defined in
paragraph G of this Subscription Agreement;
(u) "Regulation S" means Regulation S under the U.S. Securities Act;
(v) "Regulatory Authorities" means the securities regulatory
authorities in British Columbia;
(w) "Security" means one unit of the Company offered under the Private
Placement, each Security consisting of one Common Share, one
Warrant A, and one Warrant B, and "Securities" means more than one
Security;
(x) "Subscription Agreement" means this subscription agreement to be
entered into between the Purchaser and the Company in respect of
the purchase and sale of the Purchaser's Securities and includes
all schedules attached to this subscription agreement, in each
case as they may be amended or supplemented from time to time;
(y) "Time of Closing" has the meaning given to that term in section
9.1;
(z) "United States" means the United States of America, its
territories and possessions, any State of the United States, and
the District of Columbia;
(aa) "U.S. Person" means a U.S. person as such term is defined in
Regulation S, which definition includes an individual resident in
the United States, a partnership or corporation organized or
incorporated under the law of the United States, and an estate or
trust of which any executor or administrator or trustee,
respectively, is a U.S. Person;
(bb) "U.S. Securities Act" means the Securities Act of 1933, as
amended, of the United States;
(cc) "Warrant" means a Warrant A or a Warrant B and "Warrants" means
more than one Warrant A and/or Warrant B";
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(dd) "Warrant A" means a whole non-transferable (except to Affiliates
of the Purchaser) common share purchase warrant A, which forms
part of a Security, in the form and having the terms attached as
Schedule "C" to this Subscription Agreement and "Warrants A" means
more than one Warrant A;
(ee) "Warrant B" means a whole non-transferable (except to Affiliates
of the Purchaser) common share purchase warrant B, which forms
part of a Security, in the form and having the terms attached as
Schedule "D" to this Subscription Agreement and "Warrants B" means
more than one Warrant B; and
(ff) "Warrant Share" means a Common Share of the Company to be issued
upon the exercise of two Warrants A or two Warrants B and "Warrant
Shares" means more than one Warrant Share.
2. SUBSCRIPTION PROCEDURE
2.1 On or before the Time of Closing the Purchaser will deliver to the Company:
(a) the Purchaser's Subscription Funds, in CANADIAN CURRENCY, by
certified cheque or bank draft payable to Entree Gold Inc.;
(b) a completed and originally executed copy of this Subscription
Agreement;
(c) a completed and originally executed copy of the Accredited
Investor Certificate in the form attached as Schedule "A" to this
Subscription Agreement; and
(d) a completed and originally executed copy of the Corporate Placee
Registration Form 4C (the "Form") attached as Schedule "B" to this
Subscription Agreement, unless the Form has recently been filed
with the Exchange and the Exchange has been advised of any changes
in the information provided in the Form, prior to the Purchaser
participating in the Private Placement.
2.2 The Company will issue and sell the Purchaser's Securities to the Purchaser
and cause to be issued and delivered, at the Time of Closing, a definitive
certificate representing the Purchaser's Common Shares, a definitive certificate
representing the Purchaser's Warrants A in the form attached as Schedule "C" to
this Subscription Agreement and a definitive certificate representing the
Purchaser's Warrants B in the form attached as Schedule "D" to this Subscription
Agreement, each registered in the name of the Purchaser (or in the other name or
names as requested by the Purchaser).
3. TERMS OF PRIVATE PLACEMENT
3.1 The Company covenants that it will use its reasonable best efforts to
satisfy as expeditiously as possible each of the conditions of the Exchange
required to be satisfied prior to the Exchange's final acceptance of the Private
Placement.
3.2 Each Security will consist of one common share in the capital of the
Company, one Warrant A, and one Warrant B. Two Warrants A will entitle the
warrant holder to purchase one common share of the Company at a price of
CDN$2.75 for a period of two years following the closing of the private
placement, and two Warrants B will entitle the warrant holder to purchase one
common share of the Company at a price of CDN$3.00 for a period of two years
following the closing of the private placement. The Warrants may not be
exercised in the United States or by or on behalf of a U.S. Person, without
registration under
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the U.S. Securities Act and applicable state securities laws, unless an
exemption from registration is available and the holder has provided the Company
with an opinion of legal counsel satisfactory to the Company stating that an
exemption from registration is available.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
4.1 By executing this Subscription Agreement, the Purchaser represents, warrants
and covenants to the Company (and acknowledges that the Company and its counsel
are relying thereon) that:
(a) the Purchaser is resident in the jurisdiction specified in
paragraph A of this Subscription Agreement;
(b) the Purchaser is purchasing the Purchaser's Securities as
principal for its own account and not for the benefit of any other
person;
(c) the Purchaser is not a U.S. Person, is not purchasing the
Securities for the account of a U.S. Person or for resale in the
United States and did not receive the offer to purchase the
Securities or execute this Subscription Agreement in the United
States;
(d) the Purchaser understands and acknowledges that none of the
Securities, Common Shares, Warrants or Warrant Shares have been or
will be registered under the U.S. Securities Act or the securities
laws of any state of the United States, that such securities may
not be offered or sold, directly or indirectly, in the United
States except pursuant to registration under the U.S. Securities
Act and the securities laws of all applicable states or available
exemptions therefrom, and that the Company has no obligation or
present intention of filing a registration statement under the
U.S. Securities Act in respect of any of such securities;
(e) with the exception of the Equity Participation Agreement in which
the Purchaser agreed to make an equity investment in the Company,
the Purchaser's Securities are not being purchased by the
Purchaser as a result of any material information concerning the
Company that has not been publicly disclosed and the Purchaser's
decision to tender this offer and purchase the Purchaser's
Securities has not been made as a result of any verbal or written
representation as to fact or otherwise (including that any person
will resell or repurchase or refund the purchase price of the
Purchaser's Securities other than in accordance with their terms)
or as to the future price or value of the Securities, Common
Shares, Warrants or Warrant Shares or made by or on behalf of the
Company or any other person and is based entirely upon currently
available public information concerning the Company;
(f) the Purchaser acknowledges that because this subscription is being
made pursuant to the Exemptions:
(i) the Purchaser is restricted from using certain of the
civil remedies available under the Applicable
Securities Laws if the Exemptions were not being
used;
(ii) the Purchaser may not receive information that might
otherwise be required to be provided to the Purchaser
under the Applicable Securities Laws if the
Exemptions were not being used; and
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(iii) the Company is relieved from certain obligations that
would otherwise apply under the Applicable Securities
Laws if the Exemptions were not being used;
(g) the Purchaser further acknowledges:
(i) that no securities commission or similar regulatory
authority has reviewed or passed on the merits of the
Securities;
(ii) there is no government or other insurance covering
the Securities;
(iii) there are risks associated with the purchase of the
Securities; and
(iv) there are restrictions on the Purchaser's ability to
resell the Securities and it is the Purchaser's
responsibility to determine what those restrictions
are and to comply with them before selling the
Securities;
(h) the offering and sale of the Purchaser's Securities to the
Purchaser was not made through an advertisement of the Securities
in printed media of general and regular paid circulation, radio,
television or telecommunications, including electronic display, or
any other form of advertisement;
(i) the Purchaser has not received or been provided with, nor has it
requested, nor does it have any need to receive an offering
memorandum or similar document in connection with the sale of the
Securities;
(j) the Purchaser is a valid and subsisting corporation under the laws
of Canada, has the necessary corporate capacity and authority to
execute and deliver this Subscription Agreement and to observe and
perform its covenants and obligations hereunder and has taken all
necessary corporate action in respect thereof;
(k) upon the execution and delivery of this Subscription Agreement,
this Subscription Agreement will constitute a legal, valid and
binding contract of the Purchaser enforceable against the
Purchaser in accordance with its terms and neither the agreement
resulting from such acceptance nor the completion of the
transactions contemplated hereby conflicts with, or will conflict
with, or results, or will result in, a breach or violation of any
law applicable to the Purchaser, any constating documents of the
Purchaser or any agreement to which the Purchaser is a party or by
which the Purchaser is bound; and
(l) the Purchaser is resident in British Columbia, the Purchaser is an
Accredited Investor and the Accredited Investor Certificate
completed and signed by the Purchaser and attached as Schedule "A"
to this Subscription Agreement is true and correct.
4.2 The foregoing representations and warranties are made by the Purchaser with
the intent that they may be relied upon in determining the Purchaser's
eligibility to acquire the Securities under Applicable Securities Laws. Unless
the Purchaser otherwise has advised the Company in writing, the representations
and warranties of the Purchaser contained in this Subscription Agreement will be
true at the Time of Closing as though they were made at the Time of Closing and
will survive the completion of the transactions contemplated under this
Subscription Agreement for a period of two years from the Closing Date.
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5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1 The Company represents and warrants to the Purchaser, and acknowledges that
the Purchaser and its counsel are relying thereon, that:
(a) the Company is a valid and subsisting corporation duly
incorporated and in good standing under the laws of the Province
of British Columbia;
(b) the Company is a reporting issuer in British Columbia and Alberta
and the Company is not in material default of any of the
requirements of the Applicable Securities Laws of those
jurisdictions or, to the best of its knowledge, any other
jurisdiction;
(c) upon receipt of payment therefor and upon their issuance, the
Common Shares forming part of the Securities will be validly
issued and outstanding fully paid and non-assessable Common Shares
of the Company registered as directed by the Purchaser, free and
clear of all trade restrictions (except as may be imposed by
operation of the Applicable Securities Laws) and, except as may be
created by the Purchaser, free and clear of all liens, charges or
encumbrances of any kind whatsoever;
(d) upon their issuance, the Warrants will be validly created, issued
and outstanding, registered as directed by the Purchaser and, upon
receipt of payment therefor and upon their issuance, the Warrant
Shares issued on the exercise of the Warrants will be validly
issued and outstanding fully paid and non-assessable Common Shares
of the Company, registered as directed by the holder thereof, and
the Warrants and Warrant Shares will be free and clear of all
trade restrictions (except as may be imposed by operation of the
Applicable Securities Laws) and, except as may be created by the
Purchaser, free and clear of all liens, charges or encumbrances of
any kind whatsoever;
(e) the Company and each of its subsidiaries holds all licences and
permits that are required for carrying on its business in the
manner in which such business has been carried on and the Company
and each of its subsidiaries has the corporate power and capacity
to own the assets owned by it and to carry on the business carried
on by it and it is duly qualified to carry on business in all
jurisdictions in which it carries on business;
(f) all prospectuses, offering memoranda, filing statements,
information circulars, material change reports, shareholder
communications, press releases and other disclosure documents of
the Company including, but not limited to, financial statements,
contain no untrue statement of a Material Fact as at the date
thereof nor do they omit to state a Material Fact which, at the
date thereof, was required to have been stated or was necessary to
prevent a statement that was made from being false or misleading
in the circumstances in which it was made;
(g) to the best of its knowledge, and except as publicly disclosed,
there are no material actions, suits, judgments, investigations or
proceedings of any kind whatsoever outstanding, against or
affecting the Company, at law or in equity or before or by any
Federal, Provincial, State, Municipal or other governmental
department, commission, board, bureau or agency of any kind
whatsoever and, to the best of the Company's knowledge, there is
no basis therefor;
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(h) the Company has good and sufficient right and authority to enter
into this Subscription Agreement and complete its transactions
contemplated under this Subscription Agreement on the terms and
conditions set forth herein;
(i) to the best of its knowledge, the execution and delivery of this
Subscription Agreement, the performance of its obligations under
this Subscription Agreement and the completion of its transactions
contemplated under this Subscription Agreement will not conflict
with, or result in the breach of or the acceleration of any
indebtedness under, or constitute default under, the constating
documents of the Company or any indenture, mortgage, agreement,
lease, licence or other instrument of any kind whatsoever to which
the Company is a party or by which it is bound, or any judgment or
order of any kind whatsoever of any Court or administrative body
of any kind whatsoever by which it is bound; and
(j) upon the execution and delivery of this Subscription Agreement,
this Subscription Agreement will constitute a legal, valid and
binding contract of the Company enforceable against the Company in
accordance with its terms and neither the agreement resulting from
such acceptance nor the completion of the transactions
contemplated hereby conflicts with, or will conflict with, or
results, or will result in, a breach or violation of any law
applicable to the Company, any constating documents of the Company
or any agreement to which the Company is a party or by which the
Company is bound.
5.2 Unless the Company otherwise has advised the Purchaser in writing, the
representations and warranties of the Company contained in this Subscription
Agreement will be true at the Time of Closing as though they were made at the
Time of Closing and will survive the completion of the transactions contemplated
under this Subscription Agreement for a period of two years from the Closing
Date.
6. COVENANTS OF THE COMPANY
6.1 The Company will:
(a) offer, sell, issue and deliver the Purchaser's Securities pursuant
to the Exemptions or qualification requirements of Applicable
Securities Laws of British Columbia and otherwise fulfill all
legal requirements required to be fulfilled by the Company
(including without limitation, compliance with all Applicable
Securities Laws) in connection with the Private Placement;
(b) use its reasonable best efforts to maintain its status as a
"reporting issuer" not in default in British Columbia and Alberta
for a period of two years from the Closing Date;
(c) use its reasonable best efforts to maintain its listing of its
Common Shares on the Exchange or the Toronto Stock Exchange for a
period of two years from the Closing Date;
(d) within the required time, file with the applicable Regulatory
Authorities and the Exchange any documents, reports and
information, in the required form, required to be filed by
Applicable Securities Laws in connection with the Private
Placement, together with any applicable filing fees and other
materials;
(e) from and including the date of this Subscription Agreement through
to and including the Time of Closing, do all such acts and things
necessary to ensure that all of the
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representations and warranties of the Company contained in this
Subscription Agreement or any certificates or documents delivered
by it pursuant thereto remain true and correct in all material
respects; and
(f) from and including the date of this Subscription Agreement through
to and including the Time of Closing, not do any such act or thing
or permit any act or thing to be done that would render any
representation or warranty of the Company contained in this
Subscription Agreement or any certificates or documents delivered
by it pursuant thereto materially untrue or materially incorrect.
7. RESALE RESTRICTIONS
7.1 The Purchaser understands and acknowledges that the Common Shares, Warrants
and Warrant Shares will be subject to a hold period of four months under
Applicable Securities Laws and that certificates representing the Common Shares,
Warrants and Warrant Shares will bear certain legends to that effect.
7.2 The Purchaser also acknowledges that it has been advised to consult its own
legal advisors with respect to applicable resale restrictions and that it is
solely responsible (and the Company is in no way responsible) for complying with
such restrictions.
7.3 If the Purchaser is a control person of the Company, the Purchaser
acknowledges that the Purchaser may be required to file a Form 45-102F1 within
the time required by Multilateral Instrument 45-102 in the case of a control
distribution by the Purchaser. The Purchaser acknowledges and accepts sole
responsibility for filing of the Form 45-102F1.
8. INDEMNITY
8.1 The Purchaser agrees to indemnify and hold harmless the Company and its
directors, officers, employees, agents, advisers and shareholders from and
against any and all loss, liability, claim, damage and expense whatsoever
including, but not limited to, any and all fees, costs and expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, administrative proceeding or investigation commenced or threatened
or any claim whatsoever arising out of or based upon any representation or
warranty of the Purchaser contained herein or in the Equity Participation
Agreement being untrue in any material respect or any breach or failure by the
Purchaser to comply with any covenant or agreement made by the Purchaser herein
or in the Equity Participation Agreement.
8.2 The Company agrees to indemnify and hold harmless the Purchaser and its
directors, officers, employees, agents, advisers and shareholders from and
against any and all loss, liability, claim, damage and expense whatsoever
including, but not limited to, any and all fees, costs and expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, administrative proceeding or investigation commenced or threatened
or any claim whatsoever arising out of or based upon any representation or
warranty of the Company contained herein or in the Equity Participation
Agreement being untrue in any material respect or any breach or failure by the
Company to comply with any covenant or agreement made by the Company herein or
in the Equity Participation Agreement.
9. CLOSING
9.1 The Purchaser acknowledges and agrees that the closing (the "Closing") of
the transactions contemplated hereby will take place on July 6, 2005 (the
"Closing Date") at 1:00 p.m. (Vancouver time) (the "Time of Closing") at the
offices of XxxXxxxx Law, Suite 950, 1055 West Georgia Street, Vancouver,
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British Columbia, or at such other time and place as the parties to this
Subscription Agreement may determine.
10. GENERAL
10.1 For the purposes of this Subscription Agreement, time is of the essence.
10.2 This offer is made for valuable consideration and, subject to applicable
laws, or unless the Company decides, for any reason, not to accept this offer,
may not be withdrawn, cancelled, terminated or revoked by the Purchaser.
10.3 The Purchaser hereby consents to the filing of any documents as may be
required to be filed with any stock exchange or securities regulatory authority
in connection with this Private Placement.
10.4 Neither this Subscription Agreement nor any provision hereof will be
modified, changed, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination is
sought.
10.5 Except for the Equity Participation Agreement and the definitive
certificates representing the Warrants, this Subscription Agreement represents
the entire agreement of the parties relating to the subject matter and there are
no representations, warranties, covenants or agreements relating to the subject
matter hereof except as stated or referred to herein or therein.
10.6 The parties hereto will execute and deliver all such further documents and
instruments and do all such acts and things as may either before or after the
execution of this Subscription Agreement be reasonably required to carry out the
full intent and meaning of this Subscription Agreement.
10.7 This Subscription Agreement will be subject to, governed by and construed
in accordance with the laws of British Columbia.
10.8 This Subscription Agreement may not be assigned by any party hereto.
10.9 The Company will be entitled to rely on delivery of a facsimile or
electronic copy of this Subscription Agreement, and acceptance by the Company of
a facsimile or electronic copy of this Subscription Agreement will create a
legal, valid and binding agreement between the Purchaser and the Company in
accordance with its terms.
10.10 This Subscription Agreement may be signed by the parties in as many
counterparts as may be deemed necessary, each of which so signed will be deemed
to be an original, and all such counterparts together will constitute one and
the same instrument.
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SCHEDULE "A" TO THE SUBSCRIPTION AGREEMENT
ACCREDITED INVESTOR CERTIFICATE
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The Purchaser represents and warrants that the Purchaser and, if applicable,
each person for whose account it is purchasing the Securities, satisfies one or
more of the categories of Accredited Investor (as that term is defined in
Multilateral Instrument 45-103) indicated below. PLEASE INDICATE EACH CATEGORY
OF ACCREDITED INVESTOR THAT YOU, THE PURCHASER, AND IF APPLICABLE, EACH PERSON
FOR WHOSE ACCOUNT YOU ARE PURCHASING SECURITIES, SATISFY, BY PLACING AN "X"
AGAINST THE APPROPRIATE CATEGORY BELOW.
______ (a) a Canadian financial institution, or an authorized foreign bank
listed in Schedule III of the Bank Act (Canada);
______ (b) the Business Development Bank of Canada incorporated under the
Business Development Bank of Canada Act (Canada);
______ (c) an association under the Cooperative Credit Associations Act
(Canada) located in Canada or a central cooperative credit society for
which an order has been made under subsection 473(1) of that Act;
______ (d) a subsidiary of any person or company referred to in paragraphs (a)
to (c), if the person or company owns all of the voting securities of
the subsidiary, except the voting securities required by law to be
owned by directors of that subsidiary;
______ (e) a person or company registered under the securities legislation of
a jurisdiction of Canada, as an adviser or dealer, other than a limited
market dealer registered under the Securities Act (Ontario) or the
Securities Act (Newfoundland and Labrador);
______ (f) an individual registered or formerly registered under the
securities legislation of a jurisdiction of Canada, as a representative
of a person or company referred to in paragraph (e);
______ (g) the government of Canada or a jurisdiction of Canada, or any crown
corporation, agency or wholly owned entity of the government of Canada
or a jurisdiction of Canada;
______ (h) a municipality, public board or commission in Canada;
______ (i) any national, federal, state, provincial, territorial or municipal
government of or in any foreign jurisdiction, or any agency of that
government;
______ (j) a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a pension
commission or similar regulatory authority of a jurisdiction of Canada;
_____ (k) an individual who, either alone or jointly with a spouse,
beneficially owns, directly or indirectly, financial assets(1) having
an aggregate realizable value that before taxes, but net of any related
liabilities, exceeds CDN$1,000,000;
______ (l) an individual whose net income before taxes exceeded CDN$200,000 in
each of the two most recent years or whose net income before taxes
combined with that of a spouse exceeded CDN$300,000, in each of the two
most recent years and who, in either case, reasonably expects to exceed
that net income level in the current year;
______ (m) a person or company, other than a mutual fund or non-redeemable
investment fund, that, either alone or with a spouse, has net assets of
at least CDN$5,000,000, and unless the person is an individual, that
amount is shown on its most recently prepared financial statements;
______ (n) a mutual fund or non-redeemable investment fund that, in the local
jurisdiction, distributes its securities only to persons or companies
that are accredited investors;
______ (o) a mutual fund or non-redeemable investment fund that, in the local
jurisdiction, is distributing or has distributed its securities under
one or more prospectuses for which the regulator has issued receipts;
______ (p) a trust company or trust corporation registered or authorized to
carry on business under the Trust and Loan Companies Act (Canada) or
under comparable legislation in a jurisdiction of Canada or a foreign
jurisdiction, trading as a trustee or agent on behalf of a fully
managed account;
______ (q) a person or company trading as agent on behalf of a fully managed
account if that person or company is registered or authorized to carry
on business under the securities legislation of a jurisdiction of
Canada or a foreign jurisdiction as a portfolio manager or under an
equivalent category of adviser or is exempt from registration as a
portfolio manager or the equivalent category of adviser;
______ (r) a registered charity under the Income Tax Act (Canada) that, in
regard to the trade, has obtained advice from an eligibility adviser or
other adviser registered to provide advice on the securities being
traded;
______ (s) an entity organized in a foreign jurisdiction that is analogous to
any of the entities referred to in paragraphs (a) through (e) and
paragraph (j) in form and function; or
___X__ (t) a person or company in respect of which all of the owners of
interests, direct or indirect, legal or beneficial, except the voting
securities required by law to be owned by directors, are persons or
companies that are accredited investors.
(1) "Financial assets" means cash and securities.
July 6, 2005
-------------------------------------------------
Date
/s/ Xxxxxxx X. Xxxxx XXXXXXX X. XXXXX
-------------------------------------------------
Purchaser's Signature or Signature by Purchaser's
duly authorized signatory
Kennecott Canada Exploration Inc.
-------------------------------------------------
(Print Name of Purchaser)
-2-
SCHEDULE "B" TO THE SUBSCRIPTION AGREEMENT
FORM 4C
CORPORATE PLACEE REGISTRATION FORM
Where subscribers to a Private Placement are not individuals, the following
information about the placee must be provided. This Form will remain on file
with the Exchange. The corporation, trust, portfolio manager or other entity
(the "Placee") need only file it on one time basis, and it will be referenced
for all subsequent Private Placements in which it participates. If any of the
information provided in this Form changes, the Placee must notify the Exchange
prior to participating in further placements with Exchange listed companies. If
as a result of the Private Placement, the Placee becomes an Insider of the
Issuer, Insiders of the Placee are reminded that they must file a Personal
Information Form (2A) or, if applicable, Declarations, with the Exchange.
1. Placee Information:
(a) Name:
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(b) Complete Address:------------------------------------------------------
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(c) Jurisdiction of Incorporation or Creation:-----------------------------
2.
(d) Is the Placee purchasing securities as a portfolio manager (Yes/No)?
------------
(b) Is the Placee carrying on business as a portfolio manager outside of
Canada (Yes/No)?------------
3. If the answer to 2(b) above was "Yes", the undersigned certifies that:
(e) It is purchasing securities of an Issuer on behalf of managed
accounts for which it is making the investment decision to purchase
the securities and has full discretion to purchase or sell securities
for such accounts without requiring the client's express consent to a
transaction;
(f) it carries on the business of managing the investment portfolios of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in ____________________ [jurisdiction],
and it is permitted by law to carry on a portfolio manager business
in that jurisdiction;
(g) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
(h) the total asset value of the investment portfolios it manages on
behalf of clients is not less than CDN$20,000,000; and
-3-
(i) it has no reasonable grounds to believe, that any of the directors,
senior officers and other insiders of the Issuer, and the persons
that carry on investor relations activities for the Issuer has a
beneficial interest in any of the managed accounts for which it is
purchasing
4. If the answer to 2(a). above was "No", please provide the names and
addresses of control persons of the Placee:
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Name City Province or Country
State
---------------------------------------------------------------------------
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---------------------------------------------------------------------------
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The undersigned acknowledges that it is bound by the provisions of applicable
Securities Law, including provisions concerning the filing of insider reports
and reports of acquisitions (See for example, sections 87 and 111 of the
Securities Act (British Columbia) and sections 176 and 182 of the Securities Act
(Alberta).
-4-
ACKNOWLEDGMENT - PERSONAL INFORMATION
"Personal Information" means any information about an identifiable individual,
and includes information contained in sections 1, 2 and 4, as applicable, of
this Form.
The undersigned hereby acknowledges and agrees that it has obtained the express
written consent of each individual to:
(j) the disclosure of Personal Information by the undersigned to the
Exchange (as defined in Appendix 6B) pursuant to this Form; and
(k) the collection, use and disclosure of Personal Information by the
Exchange for the purposes described in Appendix 6B or otherwise
identified by the Exchange, from time to time.
Dated at on .
----------------------- --------------------------------------------
------------------------------------------------
(Name of Purchaser - please print)
------------------------------------------------
(Authorized Signature)
------------------------------------------------
(Official Capacity - please print)
------------------------------------------------
(please print name of individual whose signature
appears above)
THIS IS NOT A PUBLIC DOCUMENT
-5-
SCHEDULE "C" TO THE SUBSCRIPTION AGREEMENT
Certificate No. K-A2
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
SHALL NOT TRADE THE SECURITIES BEFORE NOVEMBER 7, 2005.
WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH
ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR
THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO
OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL NOVEMBER 7, 2005.
Void after
July 6, 2007.
NON-TRANSFERABLE
COMMON SHARE PURCHASE WARRANTS "A"
----------------------------------
ENTREE GOLD INC.
(the "Company")
This certificate (the "Warrant Certificate") is to certify that, for value
received, KENNECOTT CANADA EXPLORATION INC. (the "Warrant Holder") is the holder
of 641,191 common share purchase warrants "A" (the "Warrants") of the Company.
For each TWO (2) Warrants, the Warrant Holder has the right to purchase from the
Company, upon and subject to the terms and conditions hereinafter referred to,
ONE (1) common share without par value (individually, a "Share" and
collectively, the "Shares") in the capital of the Company. The Shares may be
purchased hereunder at a price of $2.75 (Canadian) per Share unless otherwise
adjusted pursuant to the terms hereof (the "Exercise Price"), at any time up to
5:00 p.m. local time in Vancouver, British Columbia on July 6, 2007. The right
to purchase the Shares may be exercised in whole or in part, by the Warrant
Holder only, at the Exercise Price within the times set forth above by:
(a) completing and executing the Subscription Form attached hereto for the
number of the Shares which the Warrant Holder wishes to purchase, in
the manner therein indicated;
(b) surrendering this Warrant Certificate, together with a completed
Subscription Form, to Pacific Corporate Trust Company (the "Transfer
Agent"), at 10th Floor, 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0; and
(c) paying to the Transfer Agent, the appropriate Exercise Price, in
Canadian funds, for the number of Shares of the Company subscribed
for, either by certified cheque or bank draft (drawn on a Canadian
Chartered Bank) payable to the Company in Vancouver, British Columbia.
Upon surrender and payment as hereinbefore provided, the Company will issue to
the Warrant Holder or to such other person or persons as the Warrant Holder may
direct, the number of Shares subscribed for and will deliver to the Warrant
Holder, at the address set forth on the Subscription Form, a certificate or
certificates evidencing the number of Shares subscribed for. If the Warrant
Holder exercises a number of Warrants which is less than the number of Warrants
represented by this Warrant Certificate, the Company will forthwith cause to be
delivered to the Warrant Holder a further warrant certificate in respect of the
balance of the Warrants represented by this Warrant Certificate not then being
exercised.
Schedule "A" forms part of this Warrant Certificate and, without limitation, the
Warrant Holder shall be entitled to the additional rights contained in Schedule
"A".
In the event of the consolidation, amalgamation, arrangement, merger or transfer
of all or substantially all of the undertaking or assets of the Company to
another corporation (the "successor corporation"), the successor corporation
shall be bound by all the provisions hereof including the due and punctual
performance of all covenants of the Company and contemporaneously upon the
occurrence of such event, the successor corporation resulting from such
consolidation, amalgamation, arrangement, merger or transfer (if not the
Company) shall expressly assume, by a written instrument satisfactory in form to
the Warrant Holder and executed and delivered to the Warrant Holder, acting
reasonably, the due and punctual performance and observance of each and every
covenant and condition of this Warrant Certificate to be performed and observed
by the Company.
The holding of this Warrant Certificate or the Warrants represented hereby does
not constitute the Warrant Holder a shareholder of the Company.
The Company covenants to and agrees with the Warrant Holder that all Shares
which may be issued upon the exercise of the Warrants will, upon issuance, be
fully-paid and non-assessable.
Nothing contained herein confers any right upon the Warrant Holder or any other
person to subscribe for or purchase any Shares of the Company at any time
subsequent to 5:00 p.m. local time in Vancouver, British Columbia on July 6,
2007 and from and after such time, the Warrants, this Warrant Certificate and
all rights hereunder will be void.
The Warrants represented by this Warrant Certificate may not be transferred,
other than to an Affiliate of the Warrant Holder (as such term is defined in the
Equity Participation Agreement dated June 17, 2005 between the Company and the
Warrant Holder) in whole or in part, without the consent of the Company. No
transfer of the Warrants to an Affiliate will be effective unless this Warrant
Certificate, accompanied by a duly executed Transfer Form, together with such
evidence of the genuineness of each endorsement, execution and authorization and
of other matters as may reasonably be required by the Company, are delivered to
the Company. The Company will forthwith cause to be delivered to the transferee
a new warrant certificate in such transferee's name in respect of the Warrants
so transferred. No transfer of the Warrants will be made if in the opinion of
counsel to the Company addressed and delivered to the Company and the Warrant
Holder such transfer would result in the violation of any applicable securities
laws. If the Warrant Holder transfers a number of Warrants which is less than
the number of Warrants represented by this Warrant Certificate, the Company will
forthwith cause to be delivered to the Warrant Holder a further warrant
certificate in respect of the balance of the Warrants represented by this
Warrant Certificate not then being transferred.
Any Shares issued pursuant to the exercise of the Warrants prior to November 7,
2005 will bear the following legends:
"Unless permitted under securities legislation, the holder of the
securities shall not trade the securities before November 7,
2005."
AND
"Without prior written approval of the TSX Venture Exchange and
compliance with all applicable securities legislation, the
securities represented by this certificate may not be sold,
transferred, hypothecated or otherwise traded on or through the
facilities of the TSX Venture Exchange or otherwise in Canada or
to or for the benefit of a Canadian resident until November 7,
2005."
The Warrants represented by this Warrant Certificate may not be exercised in the
United States or by or on behalf of a U.S. Person or person in the United States
unless the Warrant Holder has delivered to the
-2-
Company a written opinion of counsel reasonably satisfactory to the Company to
the effect that the exercise of the Warrants by the Warrant Holder is not
subject to registration under the U.S. Securities Act of 1933, as amended (the
"U.S. Securities Act"), or the securities laws of any state of the United
States. Any Shares that are issued, pursuant to written opinion of counsel, upon
exercise of the Warrants in the United States or by or on behalf of a U.S.
person or person in the United States will bear a restrictive United States
legend in a form satisfactory to the Company and the Transfer Agent. The terms
"United States" and "U.S. person" are as defined in Regulation S under the U.S.
Securities Act.
Time will be of the essence hereof. This Warrant Certificate will be subject to,
governed by and construed in accordance with the laws of the Province of British
Columbia.
This Warrant Certificate is not valid for any purpose until it has been signed
by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed
as of the 6th day of July 2005.
ENTREE GOLD INC.
Per:
------------------------------------------
Authorized Signatory
-3-
SUBSCRIPTION FORM
To: Entree Gold Inc. (the "Company")
And to: the directors thereof
And to: Pacific Corporate Trust Company
Pursuant to the common share purchase warrants "A" (the "Warrants") issued the
6th day of July 2005, the undersigned (the "Subscriber") hereby subscribes for
and agrees to take up _________________________ common shares without par value
(the "Shares") in the capital of the Company, at a price of $2.75 (Canadian) per
Share for the aggregate sum of $_____________ (the "Subscription Funds"), and
encloses herewith a certified cheque or bank draft payable to the Company in
full payment of the Shares. The Subscriber represents and warrants that it is
not a U.S. person, did not receive the offer to purchase the Shares in the
United States, did not execute this Subscription Form in the United States and
is not purchasing the Shares for the account or benefit of a U.S. Person or
person in the United States. "United States" and "U.S. Person" are as defined in
Regulation S under the United States Securities Act of 1933, as amended.
The undersigned hereby requests that:
(a) the Shares be allotted to the undersigned;
(b) the name and address of the undersigned as shown below be entered in
the central securities register of the Company;
(c) the Shares be issued to the undersigned as fully paid and
non-assessable common shares of the Company; and
(d) a share certificate representing the Shares be issued in the name of
the undersigned.
Dated this ________ day of __________, 200__.
DIRECTION AS TO REGISTRATION:
(NAME AND ADDRESS EXACTLY AS YOU WISH THEM TO APPEAR ON YOUR SHARE CERTIFICATE
AND IN THE CENTRAL SECURITIES REGISTER.)
Full Name:
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Full Address:
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Signature:
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Title of Signatory:
------------------------------------------------------------
TRANSFER FORM
TO: ENTREE GOLD INC.
Xxxxx 0000 - 0000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 323
CERTIFICATE OF TRANSFEROR
The undersigned holder of the attached Warrant Certificate hereby sells, assigns
and transfers to ____________________________ [NAME OF TRANSFEREE],
________________ [NUMBER OF WARRANTS] Warrants of Entree Gold Inc. (the
"Company") registered in the name of the undersigned on the records of the
Company represented by the attached Warrant Certificate and irrevocably appoints
_________________________, the attorney of the undersigned to transfer the said
securities on the books or register with full power of substitution.
DATED this _________ day of _______________, 200__
---------------------------------- ------------------------------------
SIGNATURE GUARANTEED SIGNATURE OF TRANSFEROR
CERTIFICATE OF TRANSFEREE
The undersigned certifies as follows (check only one):
A [_] The undersigned is not in the United States, is not acquiring the
Warrants for the account or benefit of a person in the United States or
a U.S. Person, was not offered the Warrants in the United States and was
not in the United States when it agreed to acquire the Warrants; or
B [_] Submits herewith evidence that the transfer of Warrants to the
undersigned does not require registration under the United States
Securities Act of 1933, as amended, or any applicable securities laws,
it being understood that such evidence must be satisfactory in form and
substance to the Company.
DATED this _________ day of _______________, 200__
------------------------------------
SIGNATURE OF TRANSFEREE
Instructions:
a. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the Warrant Certificate must be
accompanied by evidence of authority to sign satisfactory to the Company.
b. Warrants shall only be transferable in accordance with applicable laws and
are subject to the terms and conditions contained in the Warrant
Certificate to which this Transfer Form is scheduled.
c. The signature of the Transferor on this Transfer Form must be guaranteed by
a Canadian chartered bank, Canadian trust company, or a member of a
recognized Medallion Guarantee program. The guarantor, in the case of a
bank or trust company, must affix a stamp bearing the actual words:
"SIGNATURE GUARANTEED".
SCHEDULE "A"
ADDITIONAL PROVISIONS
---------------------
1. DEFINITIONS
In this Warrant Certificate:
(a) "Common Shares" means the common shares in the capital of the Company;
(b) "Current Market Price" per Common Share at any date means the weighted
average closing price of the Common Shares on the TSX Venture Exchange
or, if the Common Shares in respect of which a determination of
Current Market Price is being made are not then listed thereon, on
such stock exchange on which the Common Shares are then listed which
has the highest aggregate trading volume, for the ten (10) consecutive
trading days prior to the applicable date and if the Common Shares
have not traded during such period, then the Current Market Price will
be as determined by the directors of the Company acting reasonably and
in good faith;
(c) "Expiry Time" means 5:00 p.m. local time in Vancouver, British
Columbia on July 6, 2007.
2. ADJUSTMENT OF EXERCISE RIGHTS
(1) The Exercise Price will be subject to adjustment from time to time in
the events and in the manner provided as follows. The adjustments to the
Exercise Price will only have effect with respect to subscriptions where the
Subscription Form, together with the aggregate Exercise Price, is delivered to
the Company after the effective date or record date of such adjustments, as the
case may be.
(2) If and whenever, at any time after the date hereof and prior to the
Expiry Time, the Company:
(a) issues Common Shares (or securities convertible into or exchangeable
for Common Shares) to holders of Common Shares as a stock dividend or
other distribution (other than dividends paid in the ordinary course);
(b) subdivides its outstanding Common Shares into a greater number of
Common Shares; or
(c) consolidates its outstanding Common Shares into a smaller number of
Common Shares;
(any of such events in paragraphs (a), (b) and (c) being hereinafter referred to
as a "Common Share Reorganization"), then the Exercise Price will be adjusted,
effective immediately after the effective date or record date for the occurrence
of a Common Share Reorganization, as the case may be, at which the holders of
Common Shares are determined for the purpose of the Common Share Reorganization,
by multiplying the Exercise Price in effect immediately prior to such effective
date or record date by a fraction, the numerator of which will be the number of
Common Shares outstanding on such effective date or record date before giving
effect to such Common Share Reorganization and the denominator of which will be
the number of Common Shares outstanding immediately after giving effect to such
Common Share Reorganization (including, in the case where securities convertible
into or exchangeable for Common Shares are distributed, the number of Common
Shares that would have been outstanding had all such securities been converted
into or exchanged for Common Shares on such effective date or record date).
(3) If and whenever, at any time after the date hereof and prior to the
Expiry Time, the Company fixes a record date for the issue of rights, options or
warrants to all or substantially all of the
-ii-
holders of Common Shares under which such holders are entitled, during a period
expiring not more than forty-five (45) days after the date of such issue (the
"Rights Period"), to subscribe for or purchase Common Shares (or securities
convertible into or exchangeable for Common Shares) at a price per Common Share
to the holder (or at a conversion or exchange price per Common Share during the
Rights Period to the holder in the case of securities convertible into or
exchangeable for Common Shares) of less than 95% of the Current Market Price for
the Common Shares on such record date (any of such events hereinafter referred
to as a "Rights Offering"), then the Exercise Price will be adjusted, effective
immediately after the end of the Rights Period, to a price determined by
multiplying the Exercise Price in effect immediately prior to the end of the
Rights Period by a fraction:
(a) the numerator of which will be the aggregate of:
(i) the number of Common Shares outstanding as of the record date for
the Rights Offering; and
(ii) a number determined by dividing: (A) the aggregate of: (I) the
product of the number of Common Shares issued or subscribed for
during the Rights Period upon the exercise of the rights,
warrants or options under the Rights Offering and the price at
which such Common Shares are offered; and, if the Rights Offering
is in respect of securities convertible into or exchangeable for
Common Shares (in which case (A) (I) will not apply to such
securities), (II) the product of the exchange or conversion price
of such securities exchangeable for or convertible into Common
Shares and the number of Common Shares for or into which such
securities issued or subscribed for pursuant to the Rights
Offering during the Rights Period could have been exchanged or
converted; by (B) the Current Market Price of the Common Shares
as of the record date for the Rights Offering; and
(b) the denominator of which will be the aggregate of:
(i) the number of Common Shares outstanding as of the record date for
the Rights Offering; and
(ii) the aggregate of: (I) the number of Common Shares issued or
subscribed for during the Rights Period upon the exercise of the
rights, warrants or options under the Rights Offering; and, if
the Rights Offering is in respect of securities convertible into
or exchangeable for Common Shares (in which case (ii)(I) will not
apply to such securities), (II) the number of Common Shares for
or into which such securities exchangeable for or convertible
into Common Shares issued or subscribed for pursuant to the
Rights Offering during the Rights Period could have been
exchanged or converted.
A Warrant Holder who has exercised Warrants during the period beginning
immediately after the record date for a Rights Offering and ending on the last
day of the Rights Period for the Rights Offering will, in addition to the Common
Shares to which that Warrant Holder would otherwise be entitled upon such
exercise, be entitled to that number of additional Common Shares equal to the
result obtained when the difference, if any, between the Exercise Price in
effect immediately prior to the end of such Rights Offering and the Exercise
Price as adjusted for such Rights Offering pursuant to this subsection is
multiplied by the number of Common Shares received upon the exercise of Warrants
by the Warrant Holder during such period, and the resulting product is divided
by the Exercise Price as adjusted for such Rights Offering pursuant to this
subsection. Such additional Common Shares will be deemed to have been issued to
the Warrant Holder immediately following the end of the Rights Period and a
certificate for such additional Common Shares will be delivered to the Warrant
Holder within ten (10) business days following the end of the Rights Period. To
the extent that any such rights, options or warrants are not so exercised on or
before the expiry thereof, the Exercise Price will be readjusted to the Exercise
Price which
-iii-
would then be in effect based on the number of Common Shares (or the securities
convertible into or exchangeable for Common Shares) actually delivered on the
exercise of such rights, options or warrants.
(4) If and whenever, at any time after the date hereof and prior to the
Expiry Time, the Company fixes a record date for the issue or the distribution
to all or substantially all the holders of Common Shares of: (a) securities of
the Company, including, for greater certainty, rights, options or warrants to
acquire securities of the Company or any of its property or assets and including
evidences of indebtedness; or (b) any property or other assets, including
evidences of indebtedness, and if such issuance or distribution does not
constitute a dividend paid in the ordinary course, a Common Share Reorganization
or a Rights Offering (any of such nonexcluded events hereinafter referred to as
a "Special Distribution"), the Exercise Price will be adjusted effective
immediately after such record date to a price determined by multiplying the
Exercise Price in effect on such record date by a fraction:
(a) the numerator of which will be:
(i) the product of the number of Common Shares outstanding on such
record date and the Current Market Price of the Common Shares on
such record date; less
(ii) the fair market value, as determined by the board of directors of
the Company (whose determination will be conclusive), to the
holders of Common Shares of such securities or property or other
assets so issued or distributed in the Special Distribution; and
(b) the denominator of which will be the product of the number of Common
Shares outstanding on such record date and the Current Market Price of
the Common Shares on such record date.
To the extent that any Special Distribution is not so made, the Exercise Price
will be immediately readjusted, with retroactive effect to the record date, to
the Exercise Price which would then be in effect based upon such securities or
property or other assets as actually distributed.
(5) If and whenever at any time after the date hereof and prior to the
Expiry Time, there is a reclassification of the Common Shares at any time
outstanding or a change or exchange of the Common Shares into or for other
shares or into or for other securities or any other capital reorganization
(other than a Common Share Reorganization), or a consolidation, amalgamation or
merger of the Company with or into any other company or other entity (other than
a consolidation, amalgamation or merger which does not result in any
reclassification of the outstanding Common Shares or a change or exchange of the
Common Shares into or for other shares), or a transfer of the undertaking or
assets of the Company as an entirety or substantially as an entirety to another
corporation or other entity in which the holders of Common Shares are entitled
to receive shares, other securities or other property (any of such events
hereinafter referred to as a "Capital Reorganization"), the Warrant Holder who
exercises Warrants held after the effective date of such Capital Reorganization
will be entitled to receive, and will accept for the same aggregate
consideration, in lieu of the number of Common Shares to which such Warrant
Holder was previously entitled, the aggregate number of shares, other securities
or other property which such Warrant Holder would have been entitled to receive
as a result of such Capital Reorganization if, on the effective date thereof,
the Warrant Holder had been the registered holder of the number of Common Shares
to which the Warrant Holder was previously entitled upon such exercise. The
Company will take all steps necessary to ensure that, on an exercise of Warrants
following a Capital Reorganization, the Warrant Holder will receive the
aggregate number of shares, other securities or other property to which the
Warrant Holder is entitled as a result of the Capital Reorganization.
Appropriate adjustments will be made as a result of any such Capital
Reorganization in the application of the provisions set forth in this Warrant
Certificate with respect to the rights and interests thereafter of the Warrant
Holder, such that the provisions set forth in this Warrant Certificate will
thereafter correspondingly be made applicable as nearly as practicable in
relation to any shares, other securities or other property thereafter
deliverable upon the exercise of any Warrants.
-iv-
(6) If the purchase price provided for in any rights, options or warrants
(the "RIGHTS OFFERING PRICE") referred to in subsection 2(3) or 2(4) of this
Schedule "A" is decreased, the Exercise Price will forthwith be changed so as to
decrease the Exercise Price to the Exercise Price that would have been obtained
if the adjustment to the Exercise Price made under subsection 2(3) or 2(4), as
the case may be, with respect to such rights, options or warrants had been made
on the basis of the Rights Offering Price as so decreased, provided that the
terms of this subsection will not apply to any decrease in the Rights Offering
Price resulting from terms in any such rights, options or warrants designed to
prevent dilution except to the extent that the resulting decrease in the
Exercise Price under this subsection would be greater than the decrease, if any,
in the Exercise Price to be made under the terms of this Schedule "A" by virtue
of the occurrence of the event giving rise to such decrease in the Rights
Offering Price.
(7) In any case in which this section 2 of this Schedule "A" shall require
that an adjustment shall become effective immediately after a record date for an
event referred to herein, the Company may defer, until the occurrence of such
event, issuing to the Warrant Holder, if any Warrants are exercised after such
record date and before the occurrence of such event, the additional Common
Shares issuable upon such exercise by reason of the adjustment required by such
event; provided, however, that the Company shall deliver to the Warrant Holder
an appropriate instrument evidencing the Warrant Holder's right to receive such
additional Common Shares upon the occurrence of such event and the right to
receive any distributions made on such additional Common Shares declared in
favour of holders of record of Common Shares on and after the date of exercise
of such Warrants or such later date on which the Warrant Holder would, but for
the provisions of this subsection 2(7), have become the holder of record of such
additional Common Shares.
(8) If and whenever at any time after the date hereof and prior to the
Expiry Time, there is an adjustment in the Exercise Price pursuant to the
provisions of this Schedule "A", the number of Common Shares issuable upon the
exercise of each Warrant hereunder will be adjusted contemporaneously with the
adjustment of the Exercise Price by multiplying the number of Common Shares
previously issuable on the exercise thereof by a fraction the numerator of which
will be the Exercise Price in effect immediately prior to such adjustment and
the denominator of which will be the Exercise Price resulting from such
adjustment.
3. RULES REGARDING CALCULATION OF ADJUSTMENT OF EXERCISE PRICE
For the purposes of section 2 of this Schedule "A":
(1) The adjustments provided for in section 2 are cumulative and will be
computed to the nearest one-tenth of one cent and will be made successively
whenever an event referred to therein occurs, subject to the following
subsections of this section 3.
(2) No adjustment in the Exercise Price will be made in respect of any
event described in section 2 of this Schedule "A", other than the events
referred to in subsections 2(2)(c) and 2(2)(d), if the Warrant Holder is
entitled to participate in such event on the same terms, mutatis mutandis, as if
it had exercised the Warrants prior to or on the effective date or record date
of such event. Any such participation may be subject to the prior consent of
each stock exchange on which the Common Shares are listed.
(3) No adjustment in the Exercise Price is required to be made unless such
adjustment would result in a change of at least 1% in the prevailing Exercise
Price, provided however, that any adjustment which, except for the provisions of
this subsection, would otherwise have been required to be made, will be carried
forward and taken into account in any subsequent adjustments.
(4) If at any time a dispute arises with respect to adjustments provided
for in section 2 of this Schedule, such dispute will be conclusively determined
by the auditors of the Company or if they are unable or unwilling to act, by
such other firm of independent chartered accountants as may be selected by the
directors of the Company and any such determination, absent manifest error, will
by binding upon the
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Company, the Warrant Holder and shareholders of the Company. The Company will
provide such auditors or accountants with access to all necessary records of the
Company.
(5) If the Company sets a record date to determine the holders of the
Common Shares for the purpose of entitling them to receive any dividend or
distribution or sets a record date to take any other action and, thereafter and
before the distribution to such shareholders of any such dividend or
distribution or the taking of any other action, decides not to implement its
plan or pay or deliver such dividend or distribution or take such other action,
then no adjustment in the Exercise Price will be required by reason of the
setting of such record date.
(6) In the absence of a resolution of the directors of the Company fixing a
record date for a Special Distribution or Rights Offering, the Company will be
deemed to have fixed as the record date therefore the date on which the Special
Distribution or Rights Offering is effected.
(7) Any adjustment to the Exercise Price under the terms of this Warrant
Certificate is subject to any requisite approval of the stock exchange upon
which the Common Shares are listed.
4. NOTICE OF ADJUSTMENT AND CERTIFICATE
(a) The Company covenants that, so long as the Warrants remain
outstanding, it will give notice to the Warrant Holder of its
intention to fix a record date for any event referred to in
subsections 2(2), 2(3) or 2(4) of this Schedule "A" which may give
rise to an adjustment in the Exercise Price, and such notice shall
specify the particulars of such event and the record date and the
effective date for such event, provided that the Company shall only be
required to specify in such notice such particulars of such event as
shall have been fixed and determined on the date on which such notice
is given. Such notice shall be given not less than fourteen (14) days
prior to the applicable record date.
(b) The Company shall from time to time, immediately after the occurrence
of any event which requires an adjustment or readjustment as provided
in section 2 of this Schedule "A", deliver a notice to the Warrant
Holder specifying the nature of the event requiring the same and the
amount of the adjustment or readjustment necessitated thereby
including the resulting Exercise Price and setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
5. COMPANY TO RESERVE SHARES; FURTHER ASSURANCES
(a) The Company covenants that it will, until the Expiry Time, reserve and
keep available out of its authorized Common Shares (if the number
thereof is or becomes limited) solely for the purpose of issue upon
the exercise of Warrants as provided herein, and issue to Warrant
Holders who may exercise their subscription rights hereunder, such
number of Common Shares as shall then be issuable upon the exercise of
all outstanding Warrants, and that all such Common Shares shall be
listed on the TSX Venture Exchange and/or any other stock exchange on
which the Common Shares are then listed for trading upon their
issuance. All Common Shares which shall be so issuable shall be duly
and validly issued as fully paid and non-assessable common shares of
the Company.
(b) The Company covenants that it will do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered, all
other acts, deeds and assurances as may be reasonably required for the
better accomplishing and effecting of the provisions of this Warrant
Certificate.
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6. NOTICE
(a) Any notice to the Company hereunder shall be validly given if
delivered by personal delivery or courier to the Company to the
attention of the President at the Company's Address and any notice so
delivered shall be deemed to be validly given when delivered.
(b) Unless herein otherwise expressly provided, any notice to be given to
the Warrant Holder hereunder shall be validly given if delivered by
personal delivery or courier addressed to the Warrant Holder at its
address appearing on the records of the Company and any notice so
delivered shall be deemed to be validly given when delivered. In
determining under any provision hereof the date when notice of any
meeting or other event must be given, the date of giving notice shall
be excluded and the date of the meeting or other event shall be
included.
7. NO FRACTIONAL SHARES
Notwithstanding any adjustment provided for in section 2 of this Schedule,
the Company will not be required upon the exercise of any Warrants to issue
fractional Common Shares in satisfaction of its obligations hereunder and
the Warrant Holder understands and agrees that, in satisfaction of its
right to otherwise have received a fraction of a Common Share, the Company
will pay to the Warrant Holder by cheque the amount obtained when the
fraction of a Common Share to which the Warrant Holder would be entitled is
multiplied by the Current Market Price on the effective date or record
date, as the case may be, of such adjustment, if such amount is greater
than $5.
SCHEDULE "D" TO THE SUBSCRIPTION AGREEMENT
Certificate No. K-B2
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
SHALL NOT TRADE THE SECURITIES BEFORE NOVEMBER 7, 2005.
WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH
ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR
THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO
OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL NOVEMBER 7, 2005.
Void after
July 6, 2007.
NON-TRANSFERABLE
COMMON SHARE PURCHASE WARRANTS "B"
----------------------------------
ENTREE GOLD INC.
(the "Company")
This certificate (the "Warrant Certificate") is to certify that, for value
received, KENNECOTT CANADA EXPLORATION INC. (the "Warrant Holder") is the holder
of 641,191 common share purchase warrants "B" (the "Warrants") of the Company.
For each TWO (2) Warrants, the Warrant Holder has the right to purchase from the
Company, upon and subject to the terms and conditions hereinafter referred to,
one (1) common share without par value (individually, a "Share" and
collectively, the "Shares") in the capital of the Company. The Shares may be
purchased hereunder at a price of $3.00 (Canadian) per Share unless otherwise
adjusted pursuant to the terms hereof (the "Exercise Price"), at any time up to
5:00 p.m. local time in Vancouver, British Columbia on July 6, 2007. The right
to purchase the Shares may be exercised in whole or in part, by the Warrant
Holder only, at the Exercise Price within the times set forth above by:
(a) completing and executing the Subscription Form attached hereto for the
number of the Shares which the Warrant Holder wishes to purchase, in
the manner therein indicated;
(b) surrendering this Warrant Certificate, together with a completed
Subscription Form, to Pacific Corporate Trust Company (the "Transfer
Agent"), at 10th Floor, 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0; and
(c) paying to the Transfer Agent, the appropriate Exercise Price, in
Canadian funds, for the number of Shares of the Company subscribed
for, either by certified cheque or bank draft (drawn on a Canadian
Chartered Bank) payable to the Company in Vancouver, British Columbia.
Upon surrender and payment as hereinbefore provided, the Company will issue to
the Warrant Holder or to such other person or persons as the Warrant Holder may
direct, the number of Shares subscribed for and will deliver to the Warrant
Holder, at the address set forth on the Subscription Form, a certificate or
certificates evidencing the number of Shares subscribed for. If the Warrant
Holder exercises a number of Warrants which is less than the number of Warrants
represented by this Warrant Certificate, the Company will forthwith cause to be
delivered to the Warrant Holder a further warrant certificate in respect of the
balance of the Warrants represented by this Warrant Certificate not then being
exercised.
Schedule "A" forms part of this Warrant Certificate and, without limitation, the
Warrant Holder shall be entitled to the additional rights contained in Schedule
"A".
In the event of the consolidation, amalgamation, arrangement, merger or transfer
of all or substantially all of the undertaking or assets of the Company to
another corporation (the "successor corporation"), the successor corporation
shall be bound by all the provisions hereof including the due and punctual
performance of all covenants of the Company and contemporaneously upon the
occurrence of such event, the successor corporation resulting from such
consolidation, amalgamation, arrangement, merger or transfer (if not the
Company) shall expressly assume, by a written instrument satisfactory in form to
the Warrant Holder and executed and delivered to the Warrant Holder, acting
reasonably, the due and punctual performance and observance of each and every
covenant and condition of this Warrant Certificate to be performed and observed
by the Company.
The holding of this Warrant Certificate or the Warrants represented hereby does
not constitute the Warrant Holder a shareholder of the Company.
The Company covenants to and agrees with the Warrant Holder that all Shares
which may be issued upon the exercise of the Warrants will, upon issuance, be
fully-paid and non-assessable.
Nothing contained herein confers any right upon the Warrant Holder or any other
person to subscribe for or purchase any Shares of the Company at any time
subsequent to 5:00 p.m. local time in Vancouver, British Columbia on July 6,
2007 and from and after such time, the Warrants, this Warrant Certificate and
all rights hereunder will be void.
The Warrants represented by this Warrant Certificate may not be transferred,
other than to an Affiliate of the Warrant Holder (as such term is defined in the
Equity Participation Agreement dated June 17, 2005 between the Company and the
Warrant Holder) in whole or in part, without the consent of the Company. No
transfer of the Warrants to an Affiliate will be effective unless this Warrant
Certificate, accompanied by a duly executed Transfer Form, together with such
evidence of the genuineness of each endorsement, execution and authorization and
of other matters as may reasonably be required by the Company, are delivered to
the Company. The Company will forthwith cause to be delivered to the transferee
a new warrant certificate in such transferee's name in respect of the Warrants
so transferred. No transfer of the Warrants will be made if in the opinion of
counsel to the Company addressed and delivered to the Company and the Warrant
Holder such transfer would result in the violation of any applicable securities
laws. If the Warrant Holder transfers a number of Warrants which is less than
the number of Warrants represented by this Warrant Certificate, the Company will
forthwith cause to be delivered to the Warrant Holder a further warrant
certificate in respect of the balance of the Warrants represented by this
Warrant Certificate not then being transferred.
Any Shares issued pursuant to the exercise of the Warrants prior to November 7,
2005 will bear the following legends:
"Unless permitted under securities legislation, the holder of the
securities shall not trade the securities before November 7,
2005."
AND
"Without prior written approval of the TSX Venture Exchange and
compliance with all applicable securities legislation, the
securities represented by this certificate may not be sold,
transferred, hypothecated or otherwise traded on or through the
facilities of the TSX Venture Exchange or otherwise in Canada or
to or for the benefit of a Canadian resident until November 7,
2005."
The Warrants represented by this Warrant Certificate may not be exercised in the
United States or by or on behalf of a U.S. Person or person in the United States
unless the Warrant Holder has delivered to the
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Company a written opinion of counsel reasonably satisfactory to the Company to
the effect that the exercise of the Warrants by the Warrant Holder is not
subject to registration under the U.S. Securities Act of 1933, as amended (the
"U.S. Securities Act"), or the securities laws of any state of the United
States. Any Shares that are issued, pursuant to written opinion of counsel, upon
exercise of the Warrants in the United States or by or on behalf of a U.S.
person or person in the United States will bear a restrictive United States
legend in a form satisfactory to the Company and the Transfer Agent. The terms
"United States" and "U.S. person" are as defined in Regulation S under the U.S.
Securities Act.
Time will be of the essence hereof. This Warrant Certificate will be subject to,
governed by and construed in accordance with the laws of the Province of British
Columbia.
This Warrant Certificate is not valid for any purpose until it has been signed
by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be signed
as of the 6th day of July 2005.
ENTREE GOLD INC.
Per:
--------------------------------------
Authorized Signatory
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SUBSCRIPTION FORM
To: Entree Gold Inc. (the "Company")
And to: the directors thereof
And to: Pacific Corporate Trust Company
Pursuant to the common share purchase warrants "B" (the "Warrants") issued the
6th day of July 2005, the undersigned (the "Subscriber") hereby subscribes for
and agrees to take up ___________________ common shares without par value (the
"Shares") in the capital of the Company, at a price of $3.00 (Canadian) per
Share for the aggregate sum of $______________ (the "Subscription Funds"), and
encloses herewith a certified cheque or bank draft payable to the Company in
full payment of the Shares. The Subscriber represents and warrants that it is
not a U.S. person, did not receive the offer to purchase the Shares in the
United States, did not execute this Subscription Form in the United States and
is not purchasing the Shares for the account or benefit of a U.S. Person or
person in the United States. "United States" and "U.S. Person" are as defined in
Regulation S under the United States Securities Act of 1933, as amended.
The undersigned hereby requests that:
(a) the Shares be allotted to the undersigned;
(b) the name and address of the undersigned as shown below be entered in
the central securities register - of the Company;
(c) the Shares be issued to the undersigned as fully paid and
non-assessable common shares of the Company; and
(d) a share certificate representing the Shares be issued in the name of
the undersigned.
Dated this ________ day of _________________, 200__.
DIRECTION AS TO REGISTRATION:
(NAME AND ADDRESS EXACTLY AS YOU WISH THEM TO APPEAR ON YOUR SHARE CERTIFICATE
AND IN THE CENTRAL SECURITIES REGISTER.)
Full Name:
-----------------------------------------------------------------
Full Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Signature:
-----------------------------------------------------------------
Title of Signatory:
------------------------------------------------------------
3
TRANSFER FORM
TO: ENTREE GOLD INC.
Xxxxx 0000 - 0000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
CERTIFICATE OF TRANSFEROR
The undersigned holder of the attached Warrant Certificate hereby sells, assigns
and transfers to _______________________________ [NAME OF TRANSFEREE],
__________________________ [NUMBER OF WARRANTS] Warrants of Entree Gold Inc.
(the "Company") registered in the name of the undersigned on the records of the
Company represented by the attached Warrant Certificate and irrevocably appoints
_________________________, the attorney of the undersigned to transfer the said
securities on the books or register with full power of substitution.
DATED this ________ day of ________________, 200_____.
----------------------------------- --------------------------------------
SIGNATURE GUARANTEED SIGNATURE OF TRANSFEROR
CERTIFICATE OF TRANSFEREE
The undersigned certifies as follows (check only one):
A [_] The undersigned is not in the United States, is not acquiring the
Warrants for the account or benefit of a person in the United States or
a U.S. Person, was not offered the Warrants in the United States and was
not in the United States when it agreed to acquire the Warrants; or
B [_] Submits herewith evidence that the transfer of Warrants to the
undersigned does not require registration under the United States
Securities Act of 1933, as amended, or any applicable securities laws,
it being understood that such evidence must be satisfactory in form and
substance to the Company.
DATED this ________ day of ________________, 200_____.
--------------------------------------
SIGNATURE OF TRANSFEREE
Instructions:
a. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the Warrant Certificate must be
accompanied by evidence of authority to sign satisfactory to the Company.
b. Warrants shall only be transferable in accordance with applicable laws and
are subject to the terms and conditions contained in the Warrant
Certificate to which this Transfer Form is scheduled.
c. The signature of the Transferor on this Transfer Form must be guaranteed by
a Canadian chartered bank, Canadian trust company, or a member of a
recognized Medallion Guarantee program. The guarantor, in the case of a
bank or trust company, must affix a stamp bearing the actual words:
"SIGNATURE GUARANTEED".
4
SCHEDULE "A"
ADDITIONAL PROVISIONS
---------------------
1. DEFINITIONS
In this Warrant Certificate:
(a) "Common Shares" means the common shares in the capital of the Company;
(b) "Current Market Price" per Common Share at any date means the weighted
average closing price of the Common Shares on the TSX Venture Exchange
or, if the Common Shares in respect of which a determination of
Current Market Price is being made are not then listed thereon, on
such stock exchange on which the Common Shares are then listed which
has the highest aggregate trading volume, for the ten (10) consecutive
trading days prior to the applicable date and if the Common Shares
have not traded during such period, then the Current Market Price will
be as determined by the directors of the Company acting reasonably and
in good faith;
(c) "Expiry Time" means 5:00 p.m. local time in Vancouver, British
Columbia on July 6, 2007.
2. ADJUSTMENT OF EXERCISE RIGHTS
(1) The Exercise Price will be subject to adjustment from time to time in
the events and in the manner provided as follows. The adjustments to the
Exercise Price will only have effect with respect to subscriptions where the
Subscription Form, together with the aggregate Exercise Price, is delivered to
the Company after the effective date or record date of such adjustments, as the
case may be.
(2) If and whenever, at any time after the date hereof and prior to the
Expiry Time, the Company:
(a) issues Common Shares (or securities convertible into or exchangeable
for Common Shares) to holders of Common Shares as a stock dividend or
other distribution (other than dividends paid in the ordinary course);
(b) subdivides its outstanding Common Shares into a greater number of
Common Shares; or
(c) consolidates its outstanding Common Shares into a smaller number of
Common Shares;
(any of such events in paragraphs (a), (b) and (c) being hereinafter referred to
as a "Common Share Reorganization"), then the Exercise Price will be adjusted,
effective immediately after the effective date or record date for the occurrence
of a Common Share Reorganization, as the case may be, at which the holders of
Common Shares are determined for the purpose of the Common Share Reorganization,
by multiplying the Exercise Price in effect immediately prior to such effective
date or record date by a fraction, the numerator of which will be the number of
Common Shares outstanding on such effective date or record date before giving
effect to such Common Share Reorganization and the denominator of which will be
the number of Common Shares outstanding immediately after giving effect to such
Common Share Reorganization (including, in the case where securities convertible
into or exchangeable for Common Shares are distributed, the number of Common
Shares that would have been outstanding had all such securities been converted
into or exchanged for Common Shares on such effective date or record date).
(3) If and whenever, at any time after the date hereof and prior to the
Expiry Time, the Company fixes a record date for the issue of rights, options or
warrants to all or substantially all of the
-ii-
holders of Common Shares under which such holders are entitled, during a period
expiring not more than forty-five (45) days after the date of such issue (the
"Rights Period"), to subscribe for or purchase Common Shares (or securities
convertible into or exchangeable for Common Shares) at a price per Common Share
to the holder (or at a conversion or exchange price per Common Share during the
Rights Period to the holder in the case of securities convertible into or
exchangeable for Common Shares) of less than 95% of the Current Market Price for
the Common Shares on such record date (any of such events hereinafter referred
to as a "Rights Offering"), then the Exercise Price will be adjusted, effective
immediately after the end of the Rights Period, to a price determined by
multiplying the Exercise Price in effect immediately prior to the end of the
Rights Period by a fraction:
(a) the numerator of which will be the aggregate of:
(i) the number of Common Shares outstanding as of the record date for
the Rights Offering; and
(ii) a number determined by dividing: (A) the aggregate of: (I) the
product of the number of Common Shares issued or subscribed for
during the Rights Period upon the exercise of the rights,
warrants or options under the Rights Offering and the price at
which such Common Shares are offered; and, if the Rights Offering
is in respect of securities convertible into or exchangeable for
Common Shares (in which case (A) (I) will not apply to such
securities), (II) the product of the exchange or conversion price
of such securities exchangeable for or convertible into Common
Shares and the number of Common Shares for or into which such
securities issued or subscribed for pursuant to the Rights
Offering during the Rights Period could have been exchanged or
converted; by (B) the Current Market Price of the Common Shares
as of the record date for the Rights Offering; and
(b) the denominator of which will be the aggregate of:
(i) the number of Common Shares outstanding as of the record
date for the Rights Offering; and
(ii) the aggregate of: (I) the number of Common Shares issued or
subscribed for during the Rights Period upon the exercise of
the rights, warrants or options under the Rights Offering;
and, if the Rights Offering is in respect of securities
convertible into or exchangeable for Common Shares (in which
case (ii) (I) will not apply to such securities), (II) the
number of Common Shares for or into which such securities
exchangeable for or convertible into Common Shares issued or
subscribed for pursuant to the Rights Offering during the
Rights Period could have been exchanged or converted.
A Warrant Holder who has exercised warrants during the period beginning
immediately after the record date for a Rights Offering and ending on the last
day of the Rights Period for the Rights Offering will, in addition to the Common
Shares to which that Warrant Holder would otherwise be entitled upon such
exercise, be entitled to that number of additional Common Shares equal to the
result obtained when the difference, if any, between the Exercise Price in
effect immediately prior to the end of such Rights Offering and the Exercise
Price as adjusted for such Rights Offering pursuant to this subsection is
multiplied by the number of Common Shares received upon the exercise of Warrants
by the Warrant Holder during such period, and the resulting product is divided
by the Exercise Price as adjusted for such Rights Offering pursuant to this
subsection. Such additional Common Shares will be deemed to have been issued to
the Warrant Holder immediately following the end of the Rights Period and a
certificate for such additional Common Shares will be delivered to the Warrant
Holder within ten (10) business days following the end of the Rights Period. To
the extent that any such rights, options or warrants are not so exercised on or
before the expiry thereof, the Exercise Price will be readjusted to the Exercise
Price which
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would then be in effect based on the number of Common Shares (or the securities
convertible into or exchangeable for Common Shares) actually delivered on the
exercise of such rights, options or warrants.
(4) If and whenever, at any time after the date hereof and prior to the
Expiry Time, the Company fixes a record date for the issue or the distribution
to all or substantially all the holders of Common Shares of: (a) securities of
the Company, including, for greater certainty, rights, options or warrants to
acquire securities of the Company or any of its property or assets and including
evidences of indebtedness; or (b) any property or other assets, including
evidences of indebtedness, and if such issuance or distribution does not
constitute a dividend paid in the ordinary course, a Common Share Reorganization
or a Rights Offering (any of such nonexcluded events hereinafter referred to as
a "Special Distribution"), the Exercise Price will be adjusted effective
immediately after such record date to a price determined by multiplying the
Exercise Price in effect on such record date by a fraction:
(a) the numerator of which will be:
(i) the product of the number of Common Shares outstanding on such
record date and the Current Market Price of the Common Shares on
such record date; less
(ii) the fair market value, as determined by the board of directors of
the Company (whose determination will be conclusive), to the
holders of Common Shares of such securities or property or other
assets so issued or distributed in the Special Distribution: and
(b) the denominator of which will be the product of the number of Common
Shares outstanding on such record date and the Current Market Price of
the Common Shares on such record date.
To the extent that any Special Distribution is not so made, the Exercise Price
will be immediately readjusted, with retroactive effect to the record date, to
the Exercise Price which would then be in effect based upon such securities or
property or other assets as actually distributed.
(5) If and whenever at any time after the date hereof and prior to the
Expiry Time, there is a reclassification of the Common Shares at any time
outstanding or a change or exchange of the Common Shares into or for other
shares or into or for other securities or any other capital reorganization
(other than a Common Share Reorganization), or a consolidation, amalgamation or
merger of the Company with or into any other company or other entity (other than
a consolidation, amalgamation or merger which does not result in any
reclassification of the outstanding Common Shares or a change or exchange of the
Common Shares into or for other shares), or a transfer of the undertaking or
assets of the Company as an entirety or substantially as an entirety to another
corporation or other entity in which the holders of Common Shares are entitled
to receive shares, other securities or other property (any of such events
hereinafter referred to as a "Capital Reorganization"), the Warrant Holder who
exercises Warrants held after the effective date of such Capital Reorganization
will be entitled to receive, and will accept for the same aggregate
consideration, in lieu of the number of Common Shares to which such Warrant
Holder was previously entitled, the aggregate number of shares, other securities
or other property which such Warrant Holder would have been entitled to receive
as a result of such Capital Reorganization if, on the effective date thereof,
the Warrant Holder had been the registered holder of the number of Common Shares
to which the Warrant Holder was previously entitled upon such exercise. The
Company will take all steps necessary to ensure that, on an exercise of Warrants
following a Capital Reorganization, the Warrant Holder will receive the
aggregate number of shares, other securities or other property to which the
Warrant Holder is entitled as a result of the Capital Reorganization.
Appropriate adjustments will be made as a result of any such Capital
Reorganization in the application of the provisions set forth in this Warrant
Certificate with respect to the rights and interests thereafter of the Warrant
Holder, such that the provisions set forth in this Warrant Certificate will
thereafter correspondingly be made applicable as nearly as practicable in
relation to any shares, other securities or other property thereafter
deliverable upon the exercise of any Warrants.
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(6) If the purchase price provided for in any rights, options or warrants
(the "RIGHTS OFFERING PRICE") referred to in subsection 2(3) or 2(4) of this
Schedule "A" is decreased, the Exercise Price will forthwith be changed so as to
decrease the Exercise Price to the Exercise Price that would have been obtained
if the adjustment to the Exercise Price made under subsection 2(3) or 2(4), as
the case may be, with respect to such rights, options or warrants had been made
on the basis of the Rights Offering Price as so decreased, provided that the
terms of this subsection will not apply to any decrease in the Rights Offering
Price resulting from terms in any such rights, options or warrants designed to
prevent dilution except to the extent that the resulting decrease in the
Exercise Price under this subsection would be greater than the decrease, if any,
in the Exercise Price to be made under the terms of this Schedule "A" by virtue
of the occurrence of the event giving rise to such decrease in the Rights
Offering Price.
(7) In any case in which this section 2 of this Schedule "A" shall require
that an adjustment shall become effective immediately after a record date for an
event referred to herein, the Company may defer, until the occurrence of such
event, issuing to the Warrant Holder, if any Warrants are exercised after such
record date and before the occurrence of such event, the additional Common
Shares issuable upon such exercise by reason of the adjustment required by such
event; provided, however, that the Company shall deliver to the Warrant Holder
an appropriate instrument evidencing the Warrant Holder's right to receive such
additional Common Shares upon the occurrence of such event and the right to
receive any distributions made on such additional Common Shares declared in
favour of holders of record of Common Shares on and after the date of exercise
of such Warrants or such later date on which the Warrant Holder would, but for
the provisions of this subsection 2(7), have become the holder of record of such
additional Common Shares.
(8) If and whenever at any time after the date hereof and prior to the
Expiry Time, there is an adjustment in the Exercise Price pursuant to the
provisions of this Schedule "A", the number of Common Shares issuable upon the
exercise of each Warrant hereunder will be adjusted contemporaneously with the
adjustment of the Exercise Price by multiplying the number of Common Shares
previously issuable on the exercise thereof by a fraction the numerator of which
will be the Exercise Price in effect immediately prior to such adjustment and
the denominator of which will be the Exercise Price resulting from such
adjustment.
3. RULES REGARDING CALCULATION OF ADJUSTMENT OF EXERCISE PRICE
For the purposes of section 2 of this Schedule "A":
(1) The adjustments provided for in section 2 are cumulative and will be
computed to the nearest one-tenth of one cent and will be made successively
whenever an event referred to therein occurs, subject to the following
subsections of this section 3.
(2) No adjustment in the Exercise Price will be made in respect of any
event described in section 2 of this Schedule "A", other than the events
referred to in subsections 2(2)(c) and 2(2)(d), if the Warrant Holder is
entitled to participate in such event on the same terms, mutatis mutandis, as if
it had exercised the Warrants prior to or on the effective date or record date
of such event. Any such participation may be subject to the prior consent of
each stock exchange on which the Common Shares are listed.
(3) No adjustment in the Exercise Price is required to be made unless such
adjustment would result in a change of at least 1% in the prevailing Exercise
Price, provided however, that any adjustment which, except for the provisions of
this subsection, would otherwise have been required to be made, will be carried
forward and taken into account in any subsequent adjustments.
(4) If at any time a dispute arises with respect to adjustments provided
for in section 2 of this Schedule, such dispute will be conclusively determined
by the auditors of the Company or if they are unable or unwilling to act, by
such other firm of independent chartered accountants as may be selected by the
directors of the Company and any such determination, absent manifest error, will
by binding upon the
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Company, the Warrant Holder and shareholders of the Company. The Company will
provide such auditors or accountants with access to all necessary records of the
Company.
(5) If the Company sets a record date to determine the holders of the
Common Shares for the purpose of entitling them to receive any dividend or
distribution or sets a record date to take any other action and, thereafter and
before the distribution to such shareholders of any such dividend or
distribution or the taking of any other action, decides not to implement its
plan or pay or deliver such dividend or distribution or take such other action,
then no adjustment in the Exercise Price will be required by reason of the
setting of such record date.
(6) In the absence of a resolution of the directors of the Company fixing a
record date for a Special Distribution or Rights Offering, the Company will be
deemed to have fixed as the record date therefore the date on which the Special
Distribution or Rights Offering is effected.
(7) Any adjustment to the Exercise Price under the terms of this Warrant
Certificate is subject to any requisite approval of the stock exchange upon
which the Common Shares are listed.
4. NOTICE OF ADJUSTMENT AND CERTIFICATE
(a) The Company covenants that, so long as the Warrants remain
outstanding, it will give notice to the Warrant Holder of its
intention to fix a record date for any event referred to in
subsections 2(2), 2(3) or 2(4) of this Schedule "A" which may give
rise to an adjustment in the Exercise Price, and such notice shall
specify the particulars of such event and the record date and the
effective date for such event, provided that the Company shall only be
required to specify in such notice such particulars of such event as
shall have been fixed and determined on the date on which such notice
is given. Such notice shall be given not less than fourteen (14) days
prior to the applicable record date.
(b) The Company shall from time to time, immediately after the occurrence
of any event which requires an adjustment or readjustment as provided
in section 2 of this Schedule "A", deliver a notice to the Warrant
Holder specifying the nature of the event requiring the same and the
amount of the adjustment or readjustment necessitated thereby
including the resulting Exercise Price and setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
5. COMPANY TO RESERVE SHARES; FURTHER ASSURANCES
(a) The Company covenants that it will, until the Expiry Time, reserve and
keep available out of its authorized Common Shares (if the number
thereof is or becomes limited) solely for the purpose of issue upon
the exercise of Warrants as provided herein, and issue to Warrant
Holders who may exercise their subscription rights hereunder, such
number of Common Shares as shall then be issuable upon the exercise of
all outstanding Warrants, and that all such Common Shares shall be
listed on the TSX Venture Exchange and/or any other stock exchange on
which the Common Shares are then listed for trading upon their
issuance. All Common Shares which shall be so issuable shall be duly
and validly issued as fully paid and non-assessable common shares of
the Company.
(b) The Company covenants that it will do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered, all
other acts, deeds and assurances as may be reasonably required for the
better accomplishing and effecting of the provisions of this Warrant
Certificate.
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6. NOTICE
(a) Any notice to the Company hereunder shall be validly given if
delivered by personal delivery or courier to the Company to the
attention of the President at the Company's Address and any notice so
delivered shall be deemed to be validly given when delivered.
(b) Unless herein otherwise expressly provided, any notice to be given to
the Warrant Holder hereunder shall be validly given if delivered by
personal delivery or courier addressed to the Warrant Holder at its
address appearing on the records of the Company and any notice so
delivered shall be deemed to be validly given when delivered. In
determining under any provision hereof the date when notice of any
meeting or other event must be given, the date of giving notice shall
be excluded and the date of the meeting or other event shall be
included.
7. NO FRACTIONAL SHARES
Notwithstanding any adjustment provided for in section 2 of this Schedule,
the Company will not be required upon the exercise of any Warrants to issue
fractional Common Shares in satisfaction of its obligations hereunder and
the Warrant Holder understands and agrees that, in satisfaction of its
right to otherwise have received a fraction of a Common Share, the Company
will pay to the Warrant Holder by cheque the amount obtained when the
fraction of a Common Share to which the Warrant Holder would be entitled is
multiplied by the Current Market Price on the effective date or record
date, as the case may be, of such adjustment, if such amount is greater
than $5.