TLRS Timberline Resources Corporation (QB)

Under the Securities Exchange Act of 1934
(Amendment No.     )*

(Name of Issuer)

(Title of Class of Securities)

(CUSIP Number)

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box o.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

(Continued on following pages)

(Page 1 of 9 Pages)

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Item 1.         Security and Issuer

This statement on Schedule 13D (this “Schedule 13D”) relates to the common shares, par value $0.001 (“Shares”), of Timberline Resources Corporation, a Delaware corporation (the “Issuer”). The principal executive offices of the Issuer are located at 101 E. Lakeside, Coeur d’Alene, Idaho 83814.

Item 2.         Identity and Background

(a)-(c) This statement is filed by Waterton Precious Metals Fund II Cayman, LP, a limited partnership organized under the laws of the Cayman Islands (“Waterton Precious Metals Fund II”), Waterton Global Resource Management, LP, a limited partnership organized under the laws of the Cayman Islands (“Waterton Global Resource Management, LP”), and Waterton Global Resource Management Cayman Corp., a corporation organized under the laws of the Cayman Islands (“Waterton Global Resource Management Cayman Corp.”) and Waterton Global Resource Management, Inc., a corporation organized under the laws of Ontario, Canada (“Waterton Global Resource Management, Inc.”) (collectively, the “Reporting Persons”).

The principal business address of the Reporting Persons is Commerce Court West, 199 Bay Street, Suite 5050 Toronto, Ontario M5L 1E2.

The principal business of Waterton Precious Metals Fund II is committing capital to facilitate investments in precious and base metal assets through structured loans, joint ventures, majority and minority equity interests and other investments. The principal business of Waterton Global Resource Management, LP is performing the functions of, and serving as, the general partner of Waterton Precious Metals Fund II. The principal business of Waterton Resource Management Cayman Corp. is performing the functions of, and serving as, the general partner of Waterton Global Resource Management, LP. Waterton Global Resource Management, Inc. acts as investment advisor to the funds under its management.

The executive officers of Waterton Global Resource Management Cayman Corp. are Messrs. Isser Elishis, Kamal Toor, Richard Wells and Ms. Cheryl Brandon. The principal occupation of each is serving as a senior executive of Waterton Global Resource Management, Inc. The directors of Waterton Global Resource Management Cayman Corp. are Mr. Kalman Schoor and Mr. James Hennessy. The principal occupation of each is serving as a senior executive of Waterton Global Resource Management, Inc. The principal business address of each of the executive officers and directors of Waterton Global Resource Management Cayman Corp. is Commerce Court West, 199 Bay Street, Suite 5050 Toronto, Ontario M5L 1E2.

The executive officers of Waterton Global Resource Management, Inc. are Messrs. Elishis, Toor, Wells, Mark Hill and Ms. Brandon. The principal occupation of each is serving as a senior executive of Waterton Global Resource Management, Inc. The directors of Waterton Global Resource Management, Inc. are Messrs. Elishis, Toor and Wells. The principal occupation of each is serving as a senior executive of Waterton Global Resource Management, Inc. The principal business address of each of the executive officers and directors of Waterton Global Resource Management, Inc. is Commerce Court West, 199 Bay Street, Suite 5050 Toronto, Ontario M5L 1E2.

Messrs. Schoor, Hennessy and Elishis are citizens of the United States. Mr. Toor, Mr. Wells and Ms. Brandon are citizens of Canada. Mr. Hill is a citizen of Australia.

(d) During the last five years, none of the Reporting Persons, or, to their knowledge, any of the directors or executive officers of Reporting Persons, has been convicted in a criminal proceeding.

(e) During the last five years, none of the Reporting Persons, or, to their knowledge, any of the directors or executive officers of Reporting Persons, has been a party to a civil proceeding of a judicial or administrative body of competent and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) See item 2(a)-(c) above for the citizenship of each of the Reporting Persons.

Item 3.         Source and Amount of Funds or Other Consideration

The aggregate purchase price of 1,331,861 Shares purchased by Waterton Precious Metals Fund II on September 23, 2015 pursuant to a private placement by the Issuer was $499,447.87. Waterton Precious Metals Fund II’s payment of the aggregate purchase price was funded by cash on hand.

Item 4.         Purpose of Transaction

The Shares held by Waterton Precious Metals Fund II were acquired as described in Item 3. Waterton Precious Metals Fund II currently holds such common shares for investment purposes, subject to the following.

On September 23, 2015, Waterton Precious Metals Fund II purchased 1,331,861 common shares of the Issuer on a private placement basis at a price of $0.375 per share for a total amount of $499,447.87 (the “Private Placement”) pursuant to a subscription agreement (the “Subscription Agreement”), dated as of September 22, 2015, with the Issuer. The shares purchased in the Private Placement represent approximately 9.9% of the Issuer’s outstanding common shares after giving effect to the Private Placement. Under the Subscription Agreement, the Issuer has agreed to give Waterton

Precious Metals Fund II the right, but not the obligation, to participate in certain equity offerings by the Issuer such that Waterton Precious Metals Fund II may maintain its pro rata equity ownership in the Issuer. The Issuer has agreed to consult with Waterton Previous Metals Fund II prior to effecting such an issuance of equity securities.

In addition, Waterton Precious Metals Fund II has signed a Letter Agreement (“Letter Agreement”), dated September 13, 2015, pursuant to which Waterton Precious Metals Fund II has expressed interest in acquiring all of the issued and outstanding shares of the Issuer’s common stock for cash consideration of $0.58 per share (the “Transaction”).  The structure of the proposed Transaction remains to be determined, and the consummation of the Transaction is subject to completion of due diligence, negotiation and execution of definitive agreements, board and regulatory approvals, and other customary conditions. Pursuant to the Letter Agreement, the Issuer has granted Waterton Precious Metals Fund II an exclusivity period (“Exclusivity Period”) until 30 days following receipt of certain due diligence materials to complete its due diligence review and for the execution of definitive agreements, which may include lock-up agreements with each of the directors and officers of the Issuer and a support agreement with the Issuer (the “Definitive Agreements”).  The Issuer has also granted Waterton Precious Metals Fund II deal protections including a break fee of 5% of the aggregate value of the Transaction payable in the event the Issuer enters into an alternative transaction within a 90-day period following expiry of the Exclusivity Period.

The Definitive Agreements have not been executed, and there can be no assurance that agreement will be reached with respect to the Definitive Agreements.

The summaries contained herein of the Subscription Agreement and Letter Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such documents which are included as Exhibits 2 and 3, respectively, to this Schedule 13D and are incorporated herein by reference.

Other than as described in this Schedule 13D, the Reporting Persons have no present plans or proposals that relate to or would result in any of the matters set forth in this Item 4. However, the Reporting Persons reserve the right to change their intention with respect to any or all of the matters referred to in this Item 4, which could include, but is not limited to, any of the items enumerated in in this Item 4 of Schedule.

Item 5.         Interest in Securities of the Issuer

(a)-(b) Based on information provided by the Issuer, the aggregate percentage of Shares reported to be beneficially owned by the Reporting Persons is based upon 13,331,945 Shares outstanding.

Based on information provided by the Issuer, as of the date hereof, Waterton Precious Metals Fund II is the direct holder of 1,331,861 Shares representing 9.9% of the Shares issued and outstanding.

The aggregate number and percentage of Shares beneficially owned by each of the Reporting Persons and, for each of the Reporting Persons, the number of shares as to which there is sole power to vote or to direct the vote, shared power to vote or direct the vote, sole power to dispose or to direct the disposition, or shared power to dispose or to direct the disposition are set forth on rows 7 through 11 and row 13 of the cover pages of this Schedule 13D and are incorporated herein by reference.

Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission that any of the Reporting Persons (other than Waterton Precious Metals Fund II, to the extent it directly holds Shares reported on this Schedule 13D) is the beneficial owner of the Shares referred to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or for any other purpose, and such beneficial ownership is expressly disclaimed. Each of the Reporting Persons expressly disclaims any assertion or presumption that it and the other persons on whose behalf this statement is filed constitute a “group.”

(c) Except as set forth herein, none of the Reporting Persons, or, to their knowledge, any of the directors or executive officers of Reporting Persons, have engaged in any transactions in the Shares during the past sixty days.

(d) Not applicable.

(e) Not applicable.

Item 6.         Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Except as set forth in this Item 6 of this Schedule 13D, none of the Reporting Persons has any contract, arrangement, understanding or relationship (legal or otherwise) with any person with respect to any securities of the Issuer, including, but not limited to, any contract, arrangement, understanding or relationship.

The information set forth in Items 4 and 5 of this Schedule 13D are incorporated herein by reference.

Item 7.         Material to be Filed as Exhibits

SIGNATURE

After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned hereby certify that the information set forth in this statement is true, complete and correct.

Dated: October 5, 2015

EXHIBIT 1

JOINT FILING AGREEMENT

Pursuant to and in accordance with the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “Exchange Act”) the undersigned hereby agree to the joint filing of Waterton Precious Metals Fund II Cayman, LP, Waterton Global Resource Management, LP, Waterton Global Resource Management Cayman Corp. and Waterton Global Resource Management, Inc. on behalf of each of them of any filing required by such party under Section 13 or Section 16 of the Exchange Act or any rule or regulation thereunder (including any amendment, restatement, supplement, and/or exhibit thereto) with respect to securities of Timberline Resources Corporation, a Delaware corporation, and further agree to the filing, furnishing, and/or incorporation by reference of this Agreement as an exhibit thereto. This Agreement shall remain in full force and effect until revoked by any party hereto in a signed writing provided to each other party hereto, and then only with respect to such revoking party. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned hereby execute this Agreement this 5 day of October 2015.

[Joint Filing Agreement — Timberline Resources Corporation]

Exhibit 2

SUBSCRIPTION AGREEMENT

THIS AGREEMENT is made as of the 22nd day of September, 2015 (the “Effective Date”).

BETWEEN:

TIMBERLINE RESOURCES CORPORATION, a company incorporated under the laws of the State of Delaware and having an office at 101 East Lakeside Avenue, Coeur d’Alene, Idaho 83814

(the “Issuer”)

AND:

WATERTON PRECIOUS METALS FUND II CAYMAN, LP, an exempted limited partnership organized under the laws of the Cayman Islands and having an office at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands

(the “Purchaser”)

WHEREAS, subject to the terms and conditions set forth herein, the Purchaser will subscribe for and agrees to purchase from the Issuer and the Issuer agrees to sell to the Purchaser the Purchased Shares (as defined below) at a price of $0.375 per Common Share (as defined below).

NOW THEREFORE, in consideration of the terms, covenants and conditions set forth in this Subscription Agreement (as defined below), and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.                            DEFINITIONS

1.1                     In this Subscription Agreement, the following words and phrases have the following meanings unless otherwise indicated:

(a)                       “1933 Act” means the United States Securities Act of 1933, as amended;

(b)                       “Affiliates” means the subsidiaries and the affiliated and associated entities of the Issuer;

(c)                        “Applicable Legislation” means, as applicable, the securities laws, regulations, rules, instruments, rulings, notices and orders in each of the Reporting Jurisdictions, the applicable policy statements issued by the Commissions in each of the Reporting Jurisdictions and the rules and policies of the Canadian Exchange and the NYSE;

(d)                       “Business Day” means a day other than a Saturday or Sunday on which commercial banks are open for the transaction of regular business in the City of Toronto, Ontario;

(e)                        “Canadian Exchange” means the TSX Venture Exchange;

(f)                         “Closing” means the closing of the sale and purchase of the Purchased Shares;

(g)                        “Closing Date” means September 23, 2015 or such other date as the Issuer and the Purchaser may mutually agree upon;

(h)                       “Closing Requirements” has the meaning ascribed to such term in Section 6.4 hereof;

(i)                           “Closing Time” means 11:00 a.m. (Toronto time) on the Closing Date or such other time as the Issuer and the Purchaser may mutually agree upon;

(j)                          “Commissions” means the applicable securities commissions or securities regulatory authorities in the Reporting Jurisdictions;

(k)                       “Common Shares” means common shares with a par value of $0.001 per common share in the capital stock of the Issuer;

(l)                           “Environmental Laws” has the meaning ascribed to such term in Subsection 4.1(s) hereof;

(m)                   “Environmental Permits” has the meaning ascribed to such term in Subsection 4.1(s) hereof;

(n)                       “Equity Issuance” has the meaning ascribed to such term in Section 9.1 hereof;

(o)                       “Equity Securities” has the meaning ascribed to such term in Section 9.1 hereof;

(p)                       “Financial Statements” means the financial statements filed by the Issuer with the Commissions;

(q)                       “Letter of Intent” has the meaning ascribed to such term in Subsection 3.1(g) hereof;

(r)                          “Money Laundering Laws” has the meaning ascribed to such term in Subsection 4.1(z) hereof;

(s)                         “NYSE” means the NYSE MKT stock exchange;

(t)                          “Offering” means the offering of the Purchased Shares, on a private placement basis, by the Issuer to the Purchaser;

(u)                       “PATRIOT Act” has the meaning ascribed to such term in Section 11.15 hereof;

(v)                       “PCMLA” has the meaning ascribed to such term in Section 11.15 hereof;

(w)                     “Person” includes an individual, firm, corporation, syndicate, company, partnership, trust, joint venture, association, unincorporated organization, investment club, government or agency or political subdivision thereof and every other form of legal or business entity of whatsoever nature or kind;

(x)                       “POCA” has the meaning ascribed to such term in Section 11.15 hereof;

(y)                       “Public Record” has the meaning ascribed to such term in Subsection 3.1(f) hereof;

(z)                        “Purchased Shares” means the 1,331,861 Common Shares to be subscribed for and purchased by the Purchaser pursuant to this Subscription Agreement;

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(aa)                “Regulatory Authorities” means, collectively, the Commissions, the Canadian Exchange and the NYSE and “Regulatory Authority” means any of them;

(bb)                “Regulation D” means Regulation D promulgated by the SEC under the 1933 Act;

(cc)                  “Regulation S” means Regulation S promulgated by the SEC under the 1933 Act;

(dd)                “Reporting Jurisdictions” means the provinces of British Columbia and Alberta, and the United States;

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

(ff)                    “Subscription Agreement” means this subscription agreement as may be amended, supplemented, modified, restated or replaced from time to time;

(gg)                  “Subscription Funds” means $499,447.87, being the total purchase price for the Common Shares being subscribed for by the Purchaser pursuant to this Subscription Agreement;

(hh)                “Taxes” has the meaning ascribed to such term in Subsection 4.1(p) hereof; and

(ii)                        “United States” and “U.S. Person” have the meanings defined in Regulation S.

2.                            SUBSCRIPTION

2.1                     Subject to the terms and conditions set out herein, the Purchaser hereby subscribes for and agrees to purchase from the Issuer, and the Issuer agrees to sell to the Purchaser, the Purchased Shares at a price of $0.375 per Common Share for an aggregate purchase price of $499,447.87.

2.2                     The Purchaser confirms that, as of the Effective Date and excluding the Purchased Shares purchased as part of this Offering, it holds, directly or indirectly, or exercises direction or control over that number of Common Shares of the Issuer and/or securities convertible into Common Shares of the Issuer set out in Schedule “A” hereto.  The Purchaser further confirms that, as set out in Schedule “A” hereto, it is or is not an insider (as such term is defined in the Corporate Finance Manual of the Canadian Exchange), a member of the pro group (as such term is defined in the Rule Book of the Canadian Exchange) or a person registered as an advisor or dealer (as such term is defined in the Applicable Legislation).

2.3                   The Purchased Shares will be issued and registered in the name of the Purchaser or its nominee.

3.                            ACKNOWLEDGEMENTS, REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER

3.1                     The Purchaser acknowledges that:

(a)                       no Regulatory Authority has reviewed or passed on the merits of the Offering;

(b)                       there is no government or other insurance covering the Common Shares;

(c)                        there are risks associated with the purchase of the Common Shares;

(d)                      there are restrictions, pursuant to the Applicable Legislation, on the Purchaser’s ability to resell the Purchased Shares and it is the responsibility of the Purchaser to ascertain what

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these restrictions are and to comply with these restrictions before selling the Purchased Shares;

(e)                        the Issuer has advised the Purchaser that the Issuer is relying on an exemption from the requirements to provide the Purchaser with a prospectus and to sell the Purchased Shares through a person or company registered to sell the Purchased Shares under Applicable Legislation and, as a consequence of acquiring the Purchased Shares pursuant to this exemption, certain protections, rights and remedies provided by Applicable Legislation, including statutory rights of rescission or damages, will not be available to the Purchaser;

(f)                         the Purchased Shares have not been registered under the 1933 Act or the securities or “blue sky” laws of any state in the United States and may not be offered or sold in the United States or to a U.S. Person unless registered under the 1933 Act and the securities or “blue sky” laws of all applicable states of the United States or an exemption from such registration requirements is available, and the Issuer has no obligation or present intention of filing a registration statement under the 1933 Act in respect of any of the Purchased Shares;

(g)                        the decision to execute the Subscription Agreement and purchase the Purchased Shares agreed to be purchased hereunder has not been based upon any oral or written representation as to fact or otherwise (except as expressly set out herein) made by or on behalf of the Issuer and, save as aforesaid, the decision is based entirely on the Purchaser’s review of publicly available information regarding the Issuer filed on the System for Electronic Document Analysis and Retrieval (SEDAR) in Canada at www.sedar.com or the SEC’s EDGAR System (collectively, the “Public Record”);

(h)                       it has had access to the Public Record and has made such investigations, if any, concerning the Issuer as it has considered necessary so as to make an informed investment decision in connection with an investment in the Common Shares and it has not received, nor has it requested, nor does it have any need to receive, any offering memorandum or other document describing the business and affairs of the Issuer which has been prepared for delivery to, and review by, the Purchaser in order to assist it in making an investment decision with respect to the Purchased Shares, and except for this Subscription Agreement and the letter agreement dated September 13, 2015 by and between the Purchaser and the Issuer (the “Letter of Intent”), no other documents have been delivered or otherwise furnished to the Purchaser in connection with the Offering;

(i)                           the offering and sale of the Purchased Shares to the Purchaser were not made through an advertisement of the Purchased Shares in printed media of general and regular paid circulation, radio or television, or any other form of advertisement and the Purchaser has not become aware of any form of “general solicitation or general advertising” or “directed selling efforts” (as those terms are used in Regulation D and Regulation S, respectively) with respect to the Offering of the Purchased Shares;

(j)                          the Purchaser is solely responsible for its own due diligence investigation of the Issuer and its business, for its own analysis of the merits, risks and terms of its investment in the Purchased Shares made pursuant to this Subscription Agreement and for obtaining such legal and tax advice as it considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated under this Subscription Agreement;

(k)                       THERE ARE RISKS ASSOCIATED WITH THE PURCHASE OF THE PURCHASED SHARES AND THE PURCHASER MAY LOSE ITS ENTIRE INVESTMENT; and

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(l)                           this Subscription Agreement and the schedules and forms attached hereto require the Purchaser to provide certain personal information to the Issuer. Such information is being collected by the Issuer for the purposes of completing the purchase and sale of the Purchased Shares, including, without limitation, determining the Purchaser’s eligibility to purchase the Purchased Shares under Applicable Legislation, or preparing and registering certificates representing the Purchased Shares to be issued to the Purchaser, as the case may be, and completing filings required by the Regulatory Authorities. The Purchaser’s personal information may be disclosed by the Issuer to: (a) the Regulatory Authorities for the purposes of, inter alia, the administration and enforcement of Applicable Legislation, (b) the Issuer’s registrar and transfer agent, and (c) any other third party involved in the purchase and sale of the Purchased Shares, including legal counsel and may be included in record books in connection with such purchase and sale. By executing this Subscription Agreement, the Purchaser is deemed to be consenting to the foregoing collection, use and disclosure of the Purchaser’s personal information. The Purchaser also consents to the filing of copies or originals of any of the Purchaser’s documents described herein including, but not limited to, as may be required to be filed with the Regulatory Authorities in connection with the transactions contemplated hereby.  In addition, the Purchaser also consents to the collection, use and disclosure of the Purchaser’s personal information by the Canadian Exchange for the purposes in Schedule “C” or as otherwise identified by the Canadian Exchange from time to time.  If the Purchaser is resident in Ontario, the public official who can answer questions about the Ontario Securities Commission’s indirect collection of personal information hereunder is the Administrative Support Clerk, Ontario Securities Commission, Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario, M5H 3S8, Telephone 416-593-3684, Facsimile 416-593-8252.

3.2                     The Purchaser represents, warrants, covenants and certifies to the Issuer that:

(a)                       the Purchaser has had the opportunity to obtain independent legal, income tax and investment advice with respect to the Issuer and its subscription for the Purchased Shares hereunder including, but not limited to, restrictions with respect to trading in the Purchased Shares imposed by Applicable Legislation and the applicable securities legislation in the jurisdiction in which it resides and confirms that no representation has been made to it by or on behalf of the Issuer with respect thereto, acknowledges that it is aware of the characteristics of the Purchased Shares, the risks relating to an investment therein and of the fact that it may not be able to resell the Purchased Shares, except pursuant to exemptions under Applicable Legislation until the expiry of the applicable hold periods and in compliance with other requirements of Applicable Legislation and that the certificates representing the Purchased Shares will bear legends to this effect;

(b)                       the Purchaser is purchasing the Purchased Shares as principal for its own account, and not for the benefit of any other Person;

(c)                        the Purchaser is purchasing the Purchased Shares for investment only and not with a view to resale or distribution in violation of the Applicable Legislation;

(d)                      the Purchaser is not a Person created or used solely to purchase or hold securities in order to comply with an exemption from the prospectus requirements of Applicable Legislation and that it pre-existed the date of this Subscription Agreement and has a bona fide purpose other than investment in the Purchased Shares;

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(e)                       no Person has made to the Purchaser any written or oral representations:

(i)                          that any Person will resell or repurchase the Purchased Shares;

(ii)                       that any Person will refund the purchase price of the Purchased Shares; or

(iii)                    as to the future price or value of any of the Purchased Shares;

(f)                        the Purchaser has no knowledge of a “material fact” or “material change” (as those terms are defined in the Applicable Legislation) in the affairs of the Issuer that has not been generally disclosed to the public, save and except for this Agreement;

(g)                       the Purchaser is not a U.S. Person and that:

(i)                          the offer was not made to the Purchaser when the Purchaser was in the United States and, at the time the Purchaser’s buy order was made to the Issuer, the Purchaser was outside the United States;

(ii)                      to the knowledge of the Purchaser, the current structure of this transaction and all transactions and activities contemplated hereunder is not a scheme to avoid the registration requirements of the 1933 Act;

(iii)                  the Purchaser has no intention to distribute either directly or indirectly any of the Purchased Shares in the United States, except in compliance with the 1933 Act; and

(iv)                   the Purchaser is not and will not be purchasing any Common Shares (including the Purchased Shares) for the account or benefit of any U.S. Person;

(h)                       the Purchaser is a resident of the Cayman Islands and, to the knowledge of the Purchaser, not bound by or subject to the Applicable Legislation of the Province of British Columbia, Alberta or Ontario, as such legislation would or could relate to the transaction contemplated by this Subscription Agreement;

(i)                           the Purchaser will resell the Purchased Shares only in accordance with the provisions of the Applicable Legislation and this Subscription Agreement;

(j)                          the person executing this Subscription Agreement on behalf of the Purchaser has the necessary power and authority to do so and the investment contemplated hereby has been duly authorized by all necessary action of the Purchaser and this Subscription Agreement has been duly and validly authorized, executed and delivered by and constitutes a legal, valid, binding and enforceable obligation of the Purchaser;

(k)                       the Purchaser has such knowledge in financial and business affairs as to be capable of evaluating the merits and risks of its investment and is able to bear the economic risk of loss of its entire investment;

(l)                          the Purchaser is not a “control person” of the Issuer as defined in the Applicable Legislation, will not become a “control person” by virtue of this purchase of Common Shares, and does not intend to act in concert with any other Person to form a control group of the Issuer; and

(m)                  if required by the Applicable Legislation or the Regulatory Authorities, the Purchaser will execute, deliver, file and otherwise assist the Issuer in filing such reports, undertakings and

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other documents with respect to the issuance of the Purchased Shares, including, without limitation, the schedules hereto.

4.                            REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER

4.1                     The Issuer represents and warrants to and covenants with the Purchaser that:

(a)                       the Issuer and each of its Affiliates is a valid and subsisting corporation duly incorporated under the laws of its jurisdiction of incorporation and is in good standing with respect to all filings required under the laws of such jurisdiction;

(b)                       the Issuer and each of its Affiliates is duly registered and licensed to carry on business in the jurisdictions in which it carries on business or owns property where so required by the laws of that jurisdiction and is not otherwise precluded from carrying on business or owning property in such jurisdictions by any other commitment, agreement or document and no steps or proceedings have been taken by any Person, voluntary or otherwise, requesting or authorizing the dissolution or winding-up of the Issuer or any of its Affiliates;

(c)                        the Issuer and each of its Affiliates has full corporate power and authority to carry on its business as now carried on by it and the creation, execution, delivery and performance of this Subscription Agreement has been, or will be by the Closing Time, duly authorized by all necessary corporate action on the part of the Issuer;

(d)                       the authorized capital of the Issuer consists of 10,000,000 shares of preferred stock, par value $0.01 per share, none of which are issued and outstanding as at September 22, 2015, and 200,000,000 Common Shares, par value $0.001 per share, of which 12,000,084 Common Shares are issued and outstanding as fully paid and non-assessable as at September 22, 2015; when issued, the Purchased Shares will constitute 9.99% of the issued and outstanding Common Shares;

(e)                        no Person has any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement, for the purchase, acquisition, subscription for or issuance of Common Shares or other securities of the Issuer, except for (i) outstanding share purchase warrants to purchase up to 25,000 Common Shares and outstanding stock, (ii) options to purchase up to 533,778 Common Shares, (iii) 2,000,000 Common Shares issuable by the Issuer as consideration for an option to purchase an interest in the Talapoosa project pursuant to that certain option agreement dated March 12, 2015 by and among Talapoosa Development Corp. and the Issuer, as buyers, and American Gold Capital US Inc., Gunpoint Exploration US Ltd. and Gunpoint Exploration Ltd., as sellers, (iv) an aggregate of 675,000 Common Shares issuable in connection with the termination of employment contracts with two employees, and (v) up to US$350,000 payable in cash or Common Shares pursuant to a letter agreement dated September 11, 2015 between the Issuer and Macquarie Capital Markets Canada Ltd.; no Person has any registration rights for Common Shares;

(f)                         the Issuer will reserve or set aside sufficient shares in its treasury to issue the Purchased Shares and, at the time of issued, such Purchased Shares will be duly allotted, validly issued, fully paid and non-assessable and will be free of all liens, charges and encumbrances;

(g)                        the Issuer is a “reporting issuer” or the equivalent in each of the Reporting Jurisdictions and is in compliance in all material respects with its obligations under the Applicable Legislation of such jurisdictions and of the Canadian Exchange and the NYSE;

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(h)                      the Common Shares of the Issuer are listed for trading on the Canadian Exchange and the NYSE and no order ceasing, halting or suspending trading in the Common Shares of the Issuer nor prohibiting the sale of such Common Shares has been issued to and is outstanding against the Issuer or any of its directors, officers or promoters and no investigations or proceedings for such purposes are pending, expected or threatened;

(i)                           the Issuer has the power and authority to create, issue and deliver the Purchased Shares;

(j)                          none of the documents comprising a part of or any portion of the Public Record contains an untrue statement of a material fact as of 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 and the Issuer has disclosed in the Public Record all material facts relating to its business, assets and financial condition;

(k)                       the sale of the Purchased Shares will not be subject to the prospectus requirements of the Applicable Legislation and no document will be required to be filed and no proceeding taken or approval, permit, consent, order or authorization obtained under the Applicable Legislation in connection with the first trade of the Purchased Shares, provided that (i) the Issuer is and has been a reporting issuer in a jurisdiction of Canada for the four (4) months immediately preceding the trade, (ii) at least four (4) months have elapsed from the Closing Date, (iii) the certificates representing the Purchased Shares carry a legend stating that “Unless permitted under securities legislation, the holder of the security must not trade the security [insert date that is 4 months and a day after the distribution date]”, (iv) such trade is not a control distribution (as such term is defined in National Instrument 45-102), (v) no unusual effort is made to prepare the market or to create a demand for the Purchased Shares that are the subject of the trade, and (vi) no extraordinary commission or consideration is paid to a Person in respect of the trade;

(l)                           The Purchased Shares are being acquired for investment only and not with a view to any public distribution thereof, and Purchaser shall not offer to sell or otherwise dispose of the Purchased Shares so acquired by it in violation of any of the registration requirements of the 1933 Act.

(m)                   none of the Offering, the execution and delivery of this Subscription Agreement, the compliance by the Issuer and each of its Affiliates with the provisions of this Subscription Agreement or the consummation of the transactions contemplated herein and the issuance of the Purchased Shares to the Purchaser, for the consideration and upon the terms and conditions as set forth herein, do or will (i) require the consent, approval, authorization, order or agreement of, or registration or qualification with, any governmental agency, body or authority, court, stock exchange, securities regulatory authority or other Person, except (A) such as have been obtained, (B) acceptance of the Canadian Exchange, which will be conditionally obtained by the Closing Time, (C) acceptance of an additional listing application with respect to the Purchased Shares by the NYSE, which will be obtained by the Closing Time, or (ii) conflict with or result in any breach or violation of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Issuer or any of its Affiliates are a party or by which they or any of their properties or assets thereof are bound, or (iii) conflict with or result in any breach or violation of any provisions of, or constitute a default under the constating documents of the Issuer or any of its Affiliates or any resolution passed by the directors (or any committee thereof) or shareholders of the Issuer or any of its Affiliates, or any statute or any judgment, decree, order, rule, policy or regulation of any court,

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governmental authority, any arbitrator, stock exchange or Regulatory Authority or any of the properties or assets thereof;

(n)                       The financial statements included in each Issuer SEC filing comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing (or to the extend corrected by a subsequent restatement) and present fairly, in all material respects, the consolidated financial position of the Issuer as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statement, as permitted by Quarterly Reports on Form 10-Q).  Except as set forth in the financial statements included in the Issuer SEC filings filed prior to the date hereof, neither the Issuer nor any of its subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect.

(o)                       save and except as disclosed in the Financial Statements available on the Public Record, the Issuer and each of its Affiliates does not have any loans, notes or other indebtedness outstanding to any of its shareholders, officers, directors or employees, past or present, or any Person not dealing at “arm’s length” (as such term is used in the Income Tax Act (Canada));

(p)                       all taxes, duties, royalties, levies, imposts, assessments, deductions, charges or withholdings and all liabilities with respect thereto including any penalty and interest payable with respect thereto (collectively, the “Taxes”) due and payable by the Issuer and each of its Affiliates have been paid.  All tax returns, declarations, remittances and filings required to be filed by the Issuer and each of its Affiliates have been filed with all applicable governmental authorities and all such returns, declarations, remittances and filings are complete and accurate and no material fact or facts have been omitted therefrom which would make any of them misleading.  No examination of any tax return of the Issuer and each of its Affiliates is currently in progress by, and there are no issues or disputes outstanding with, any applicable governmental authority respecting any taxes that have been paid, or may be payable, by the Issuer and each of its Affiliates;

(q)                       the Issuer and each of its Affiliates has conducted and is conducting business in compliance in all material respects with all applicable laws, rules, regulations, tariffs, orders, consents and directives of each jurisdiction in which it carries on business and is party to all material agreements and possesses all material approvals, consents, certificates, registrations, authorizations, permits and licences issued by the appropriate provincial, municipal, federal, state or other regulatory agency or body necessary to carry on the business currently carried on by it, is in compliance in all material respects with the terms and conditions of all such agreements and all such approvals, consents, certificates, authorizations, permits and licences and with all laws, regulations, tariffs, rules, orders and directives material to its operations, and the Issuer and each of its Affiliates has not received any notice of the modification, revocation or cancellation of, any intention to modify, revoke or cancel or any proceeding relating to the modification, revocation or cancellation of any such agreement, approval, consent, certificate, authorization, permit or licence;

(r)                          applying customary standards in the United States mining industry, to the knowledge of the Issuer after due inquiry, the Issuer and each of its Affiliates has sufficient title, clear of any

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title defect or encumbrance, to its mining properties (other than mining properties to which it is a lessee, in which case it has a valid leasehold interest) and has good and sufficient title to all real property interests including, without limitation, fee simple estate of and in real property, leases, easements, rights of way, permits or licences from landowners or authorities permitting the use of land by the Issuer and each of its Affiliates necessary to permit the operation of its respective business as presently owned and conducted. The Issuer and each of its Affiliates holds all mineral rights required to continue its business and operations as currently conducted and as proposed to be conducted as set forth in the Public Record. All mineral rights held by the Issuer and each of its Affiliates are free and clear of all encumbrances and royalty burdens other than as described in the Public Record and, save as disclosed in the Public Record, none of such mineral rights are subject to reduction by reference to mine payout or otherwise except for those created in the ordinary course of business;

(s)                         the Issuer and each of its Affiliates (i) is in material compliance with all applicable federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, the “Environmental Laws”), (ii) has received all necessary permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business as presently conducted (collectively, the “Environmental Permits”), (iii) is in material compliance with all terms and conditions of each Environmental Permit, (iv) confirms that there have been no past, and there are no current claims, complaints, notices or requests for information received by the Issuer or any of its Affiliates with respect to any alleged material violation of any Environmental Laws that, individually or in the aggregate, has or may reasonably be expected to have, a material adverse effect on the business, operations or financial condition of the Issuer or any of its Affiliates, and (v) to the knowledge of the Issuer after due inquiry, there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any other Person or governmental body or agency, against or affecting the Issuer and or any of its Affiliates relating to any Environmental Laws;

(t)                          all assessments or other work required to be performed in relation to the material mining claims and the mining rights of the Issuer and each of its Affiliates in order to maintain its interest therein, if any, have been performed to date and it has complied in all material respects with all applicable governmental laws, regulations and policies in connection therewith except in respect of any non-material mining claims and mining rights that it intends to abandon or relinquish and except for any non-compliance which would not either individually or in the aggregate have a material adverse effect on the business, operations or financial condition of the Issuer or any of its Affiliates;

(u)                       all exploration activities conducted by the Issuer and each of its Affiliates on its mineral properties have been conducted in all material respects in accordance with good mining and engineering practices;

(v)                       the Issuer has complied in all material respects and will comply in all material respects with the requirements of all applicable corporate and securities laws and administrative policies and directions, including, without limitation, the Applicable Legislation with respect to the sale of the Purchased Shares;

(w)                     there are no actions, suits, proceedings, inquiries or investigations existing, pending or, to the knowledge of the Issuer after due inquiry, threatened against or adversely affecting the Issuer or any of its Affiliates or to which any of their property or assets is subject, at law or in

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equity, or before or by any court, federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which may in any way have a material adverse effect and none of the Issuer or any of its Affiliates are subject to any judgment, order, writ, injunction, decree or award of any governmental authority (including, but not limited to, the Regulatory Authorities), which, either separately or in the aggregate, has or may reasonably be expected to have a material adverse effect;

(x)                       the Issuer shall not take any action which would be reasonably expected to result in the delisting or suspension of its Common Shares on or from the Canadian Exchange or on or from any stock exchange, market or trading or quotation facility on which its Common Shares are listed or quoted (including, but not limited to, the NYSE) except in connection with an acquisition of all or substantially all of the Common Shares or a similar transaction, and the Issuer shall comply, in all material respects, with the rules and regulations thereof in connection with the Offering;

(y)                       neither the Issuer nor any of its Affiliates, nor any other Person associated with or acting on behalf of the Issuer or any of its Affiliates (including, without limitation, any director, officer, employee or agent of the Issuer or any of its Affiliates) has, directly or indirectly, while acting on behalf of the Issuer or any of its Affiliates (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, (iii) violated any provision of the Foreign Corrupt Practices Act of 1977 (as amended, supplemented, modified, restated or replaced from time to time) or similar legislation, or (iv) made any other unlawful payment;

(z)                        the operations of the Issuer and each of its Affiliates are and have been conducted at all times in compliance, in all material respects, with applicable financial recordkeeping and reporting requirements of the money laundering statutes of all applicable jurisdictions, the rules and regulations promulgated thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by each applicable governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any applicable court or governmental agency, authority or body (including, but not limited to, the Regulatory Authorities) or any arbitrator involving the Issuer or any of its Affiliates with respect to the Money Laundering Laws is pending or, to the knowledge of the Issuer after due inquiry, threatened;

(aa)                no Person has or will have, as a result of the transactions contemplated by this Agreement any rights, interest or valid claim against or upon any party hereto for any commission, fee or other compensation as a finder or broker because of any act or omission by Issuer or any of its representatives; and

(bb)                the Issuer does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest of the Issuer upon the occurrence of certain events.

5.                            SURVIVAL

5.1                     The representations, warranties and covenants described in this Subscription Agreement will be true and correct as of both the Effective Date and the Closing Time and each such representation, warranty and covenant will survive and shall continue in full force and effect until the second anniversary of the Closing Date.

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6.                            CLOSING

6.1                    This Subscription Agreement is subject to all regulatory approvals being obtained, including, without limitation, the acceptance of the Canadian Exchange.

6.2                     The Issuer’s obligation to sell the Purchased Shares to the Purchaser is also subject to the Purchaser completing, executing and returning to the Issuer the Form 4C, Corporate Placee Registration Form, of the Canadian Exchange attached hereto as Schedule “B” (or the Issuer is advised by the Purchaser that it has a current Form 4C filed with the Canadian Exchange) and such additional forms, instruments, certificates and other documents as may be required by the Canadian Exchange as a condition to the granting of its acceptance of the Offering.

6.3                     Subject to the completion of all Closing Requirements, the Closing will be completed on the Closing Time at the offices of McMillan LLP, U.S. counsel to the Issuer, or such other location as the Issuer and the Purchaser may agree.

6.4                     The obligations of the Purchaser under this Subscription Agreement are conditional upon the fulfilment, as of the Closing Time, of the following conditions precedent:

(a)                       the Offering will not violate any Applicable Legislation;

(b)                       the representations, warranties and covenants of the Issuer contained in Section 4.1 are true and correct;

(c)                        the Purchaser has not become aware of any facts not previously disclosed or known which the Purchaser determines, acting reasonably, could have a material adverse effect;

(d)                       delivery to the Purchaser of a favourable opinion of counsel to the Issuer customary for a transaction of this nature;

(e)                        delivery of an officer’s certificate of the Issuer, certifying that the Issuer is not legally prohibited or restricted from entering into and performing its obligations under this Subscription Agreement and attaching the Issuer’s constating documents and by-laws (including all amendments thereto), the resolutions of the Issuer’s board of directors approving the Offering and an incumbency certificate of the officers and directors authorized to sign on behalf of the Issuer (complete with their specimen signatures); and

(f)                         delivery of such other evidence, certificates and documentation as the Purchaser may reasonably request (collectively, the “Closing Requirements”).

6.5                     Provided that the Closing Requirements have been met or waived by the Purchaser (in the sole and absolute discretion of the Purchaser), at the closing time on the Closing Date the Purchaser shall deliver to or to the order of the Issuer a certified cheque, bank draft, certified solicitor’s trust cheque or funds by electronic wire transfer for the full amount of the Subscription Funds and upon Closing the Issuer will deliver to the Purchaser definitive certificates representing the Common Shares registered in the name of the Purchaser or its nominee as set out in Schedule “A” to this Subscription Agreement.

7.                            INDEMNITY

7.1                   The Issuer shall indemnify, defend and hold the Purchaser (which term shall, for the purposes of this section, include the Purchaser and its principals, partners, directors, officers, members, employees, direct or indirect investors, agents and affiliates and assignees and the stockholders,

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partners, directors, members, managers, officers, employees, direct or indirect investors and agents of such affiliates and assignees) harmless against any and all liabilities, losses, costs or damages, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with an untrue, inaccurate or breached statement, representation, warranty or covenant of the Issuer contained herein. The Issuer undertakes to the Purchaser to notify the Purchaser immediately of any material change in any representation or warranty relating to the Issuer set forth in this Agreement which takes place prior to the Closing Date.

8.                            LEGENDS, HOLD PERIOD AND RESALE RESTRICTIONS

8.1                     The Purchaser further acknowledges that the certificates (and any replacement certificates) representing the Purchased Shares may bear the following legends and the Purchaser agrees to sell, assign or transfer the Purchased Shares only in accordance with such legend and the Applicable Legislation:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE <INSERT DATE THAT IS FOUR (4) MONTHS AND ONE (1) DAY AFTER CLOSING DATE>.”

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE SECURITIES LAWS OF OTHER STATES AND JURISDICTIONS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT.  THE SECURITIES REPRESENTED HEREBY CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE ACT.”

8.2                         Notwithstanding the foregoing, Purchaser shall be entitled to receive from the Issuer new certificates for a like number of Shares not bearing such legend upon the request of Purchaser (a) at such time as such restrictions are no longer applicable, and (b) with respect to the restriction on transfer of such shares under the 1933 Act, delivery of a customary opinion of counsel to Purchaser, which opinion is reasonably satisfactory in form and substance to the Issuer and its counsel, that the restriction referenced in such legend is no longer required in order to ensure compliance with the 1933 Act.

8.3                         The Purchaser understands and hereby acknowledges that the Purchased Shares will be subject to certain resale restrictions imposed under applicable securities laws including, without limiting the generality of the foregoing, the requirement that the Purchased Shares not be traded for a period of four months and one day from the Closing Date, except as permitted by applicable securities laws and except with the consent of the Canadian Exchange.

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9.                            ADDITIONAL COVENANTS OF THE ISSUER

9.1                     The Issuer irrevocably covenants and agrees with the Purchaser that subject to compliance with Applicable Legislation and, if required, the acceptance of the Canadian Exchange, the Purchaser shall have the right (but not the obligation) to acquire, on a pro rata basis, Common Shares or securities convertible into Common Shares (other than options granted pursuant to the Issuer’s stock incentive plan in effect from time to time) (collectively, the “Equity Securities”) if at any time and for any reason (whether in respect of a private or public offering of securities or in connection with a corporate transaction or otherwise) the Issuer issues Equity Securities (each, an “Equity Issuance”). In the foregoing circumstances, the Purchaser shall have the right (but not the obligation) to acquire that number of Equity Securities on the same terms as the applicable Equity Issuance that would cause it to maintain the same percentage equity interest in the Issuer that it possesses immediately prior to the closing of the Equity Issuance such that the Purchaser does not suffer any equity dilution.  The Issuer hereby acknowledges that it shall not close any Equity Issuance prior to providing the Purchaser with the opportunity to exercise its rights, as such rights are described in this Section 9.1.  For greater certainty, the Issuer shall consult with (but not necessarily gain the consent of) the Purchaser prior to effecting any Equity Issuance.

9.2                     The Issuer acknowledges and agrees that the Purchaser would be irreparably harmed if any term or condition of Section 9.1 is not fulfilled or met by the Issuer, and that any such harm may not be compensated reasonably or adequately in damages. The Issuer further acknowledges and agrees that the Purchaser shall be entitled to injunctive and other equitable relief to prevent or restrain breaches of such provision or to enforce the terms and conditions thereof, by an action instituted in a court of competent jurisdiction in the Province of British Columbia, which remedy or remedies are in addition to any other remedy to which the Purchaser may be entitled at law or in equity.

10.                     NOTICE

10.1              Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered in person, by registered mail or transmitted by telecopy or other means of recorded electronic communication (such as email or .pdf), addressed as follows:

in the case of the Issuer:

Timberline Resources Corporation

101 East Lakeside Avenue

Coeur d’Alene, Idaho 83814

Attention:  Kiran Patankar, President and Chief Executive Officer, Director

Email: patankar@timberline-resources.com

Telecopier No.:  (208) 664-4860

in the case of the Purchaser:

Waterton Precious Metals Fund II Cayman, LP

c/o Waterton Global Resource Management, Inc.

Commerce Court West

199 Bay Street, Suite 5050

Toronto, ON M5L 1E2

Attention: Cheryl Brandon, Partner, Investment Management

Email: cbrandon@watertonglobal.com

Telecopier No.: (416) 504-3200

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

Waterton Global Resource Management, Inc.

Commerce Court West

199 Bay Street, Suite 5050

Toronto, ON M5L 1E2

Attention: Kamal Toor, Partner, General Counsel

Email: ktoor@watertonglobal.com

Telecopier No.: (416) 504-3200

Any such notice or other communication shall be deemed to have been given and received on the Business Day on which it was delivered (in the case of personal delivery or delivery by registered mail) or transmitted (in the case of delivery by telecopier or other means of recorded electronic communication); provided that if such notice or other communication is delivered after 5:00pm on a Business Day in the place of receipt, it shall be treated as having been received on the next Business Day immediately following the date of delivery.  Either party may change its address or telecopier number for service from time to time by giving notice to the other party in accordance with this Section 10.

11.                     GENERAL PROVISIONS

11.1              In this Subscription Agreement, unless otherwise specified, currencies are indicated in the lawful currency of the United States of America.

11.2              This Subscription Agreement is divided into articles, sections and subsections and headings are inserted for convenience only and shall not affect the construction or interpretation of any provision hereof. Unless otherwise indicated, all references in this Subscription Agreement to a “Section” or “Subsection” followed by a number and/or a letter refer to the specified section of this Subscription Agreement. Unless otherwise indicated, the terms “hereof”, “herein”, “hereunder” and “hereby” and similar expressions refer to this Subscription Agreement (as amended, supplemented, restated or replaced from time to time) and not to any particular article, section, schedule or other portion hereof.

11.3              In this Subscription Agreement, unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders. A reference to a statute or code or a specific provision thereof includes (i) every regulation made pursuant thereto, (ii) all amendments to the statute, code or regulation in force, from time to time, and (iii) any statute, code or regulation that supplements or supersedes such statute, code or regulation.

11.4              The Issuer may rely on delivery by fax machine or scanned email attachment of an executed copy of this Subscription Agreement, and acceptance by the Issuer of such faxed or scanned copy will be equally effective to create a valid and binding agreement between the Purchaser and the Issuer in accordance with the terms of this Subscription Agreement. If less than a complete copy of this Subscription Agreement is delivered to the Issuer at Closing, the Purchaser will be deemed to have accepted and agreed to all of the terms and conditions of the pages not delivered at Closing unaltered.

11.5              In the event that one or more of the provisions of this Subscription Agreement is invalid, illegal or unenforceable in any applicable jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

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11.6              Each party hereto shall from time to time (before or after the Closing), at the request of the other party hereto, do such further acts and execute and deliver such further instruments, deeds and documents as shall be reasonably required in order to fully perform and carry out the provisions of this Subscription Agreement and to comply with Applicable Legislation.  The parties hereto agree to act honestly and in good faith in the performance of their respective obligations hereunder.

11.7              This Subscription Agreement is not assignable or transferable by the parties hereto without the express prior written consent of the other party to this Subscription Agreement.

11.8              Time is of the essence of this Subscription Agreement.

11.9              Except as provided in this Subscription Agreement, the Letter of Intent and in the agreements, instruments and other documents contemplated or provided for herein and therein, this Subscription Agreement and the Letter of Intent contain the entire agreement between the parties with respect to the subject matter hereof and there are no other terms, conditions, representations or warranties whether expressed, implied, oral or written, by statute, by common law, by the Issuer, or by any other Person.

11.10       No amendment, supplement, modification or waiver or termination of this Agreement and, unless otherwise specified, no consent or approval by either party hereto, shall be binding unless executed in writing by the party to be bound thereby.

11.11       No failure or delay by either party in exercising any right, power or privilege under this Subscription Agreement will operate as a waiver thereof, nor will any single or partial exercise preclude any other or further exercise of any right, power or privilege under this Subscription Agreement.

11.12       This Subscription Agreement shall enure to the benefit of and shall bind the parties hereto and their respective successors and permitted assigns.

11.13       Nothing herein contained shall constitute, be read or construed so as to create between the parties hereto a relationship of agents, partners or joint venturers.

11.14       This Subscription Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia (without reference to its rules governing the choice or conflict of laws) and the federal laws of Canada applicable therein and the parties hereto irrevocably attorn and submit to the exclusive jurisdiction of the courts of British Columbia with respect to any dispute arising under or relating to this Subscription Agreement.

11.15       The Purchaser represents and warrants that the Subscription Funds (representing the purchase price for the Purchased Shares) that will be advanced by the Purchaser to the Issuer hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLA”), the Proceeds of Crime Act 2002 (United Kingdom) (the “POCA”) or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”) and the Purchaser acknowledges that the Issuer may in the future be required by law to disclose the Purchaser’s name and other information relating to this Subscription Agreement and the Purchaser’s subscription hereunder, on a confidential basis, pursuant to the PCMLA, POCA or the PATRIOT Act.  To the best of the Purchaser’s knowledge, none of the Subscription Funds to be provided by the Purchaser: (a) have been or will be derived from or related to any activity that is deemed criminal under the law of Canada, the United Kingdom, the United States of America or any other jurisdiction; or (b) are being tendered on behalf of a Person who has not been identified to the Purchaser.  The Purchaser agrees to promptly notify the Issuer if the Purchaser discovers that the advancing or

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advancement of the Subscription Funds violates the provisions of the PCMLA, POCA or the PATRIOT Act or other applicable laws of Canada, the United Kingdom, the United States of America or any applicable jurisdiction.

11.16       The contract arising out of this Agreement and all documents relating thereto, have been or will be drafted in English only by common accord among the parties.  Le soussigné reconnaît par les présentes qu’il a exigé que le contrat résultant de cette convention de souscription ainsi que tous documents y afférents soient rédigés en langue anglaise seulement.

11.17       This Subscription Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, and all of which when taken together shall constitute one and the same Subscription Agreement.

11.18       Each party hereby waives to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement.  Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other party hereto has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 11.18.

11.19       Each party hereto agrees to consult with the other party before issuing or making, and to provide each other reasonable prior opportunity to review, comment upon and concur with, and use all reasonable efforts to agree on, any press release, public statement or disclosure with respect to this Agreement or the transactions contemplated hereby, and further agrees not to issue any such press release, public statement or disclosure without the prior written consent of the other party.  Notwithstanding the foregoing, any party may, without the prior written consent of the other party, issue any press release, public statement or disclosure required by law (including, for the avoidance of doubt, the filing of any of this Agreement as exhibit to any report of the Issuer filed with the SEC and any other disclosures required to be filed with the SEC relating to the transactions contemplated hereby or otherwise describing the terms and conditions of this Agreement) if such party has used reasonable efforts to provide the other party a reasonable opportunity to review such press release, public statement or disclosure and has, in good faith, considered any modifications to such press release, public statement of such other party prior to the time such press release or public statement or disclosure is required to be released pursuant to applicable law, regulation or any listing agreement with the NYSE or the Canadian Exchange.

[EXECUTION PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Issuer and the Purchaser have caused this Subscription Agreement to be executed as of the Effective Date.

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SCHEDULE “A”

TO:                           Timberline Resources Corporation

The Purchaser directs the Issuer to issue, register and deliver the certificates representing the Purchased Shares as follows:

Present Ownership of Securities

The Purchaser either [check appropriate box and insert number of shares, if applicable]:

o                                    owns directly or indirectly, or exercises control or direction over,             common shares of the Issuer or securities convertible into common shares of the Issuer; or

o                                    owns directly or indirectly, or exercises control or direction over,              common shares of the Issuer and convertible securities entitling the Purchaser to acquire an additional              common shares of the Issuer.

Status of Purchaser

The Purchaser is [check any of the following applicable boxes]:

o                                    an “Insider” as such term is defined in the Corporate Finance Manual of the TSX Venture Exchange (the “Exchange”);

o                                    a Member of the “Pro Group” as such terms are defined in the Corporate Finance Manual of the Exchange;

o                                    a “registered individual” or a “registered firm” as such terms are defined in National Instrument 31-103 — Registration Requirements, Exemptions and Ongoing Registrant Obligations (a “Registrant”); or

o                                    not an “Insider”, a Member of the “Pro Group” or a Registrant.

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Corporate Placee Registration Form

The Purchaser, if following the subscription for Shares will beneficially own more than 5% of the issued and outstanding common shares of the Issuer (approximately                common shares) and if not an individual:  [check appropriate box]

o                                    has previously filed with the Exchange a Form 4C - Corporate Placee Registration Form, and represents and warrants that there has been no change to any of the information in the Corporate Placee Registration Form previously filed with the Exchange as at the Closing Date of the purchase of Shares as set out in this Agreement; or

o                                    hereby delivers a Form 4C - Corporate Placee Registration Form, in the form attached hereto as Schedule “B”, to the Issuer for filing with the Exchange, for each Purchaser and beneficial purchaser that is not an individual and has not previously filed with the Exchange a Form 4C - Corporate Placee Registration Form for which there has been no change to any of the information in the Corporate Placee Registration Form previously filed with the Exchange as at the closing of the offering of the purchase of Shares hereunder [complete and execute Schedule “B” attached hereto as required]; or

o                                    not applicable.

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SCHEDULE “B”

This Form will remain on file with the Exchange and must be completed if required under section 4(b) of Part II of Form 4B.  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 Issuers.  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:

(b)                               Complete Address:

(c)                                Jurisdiction of Incorporation or Creation: Nova Scotia

2.                                      (a)                                 Is the Placee purchasing securities as a portfolio manager: (Yes/No)?  NO   

(b)                                 Is the Placee carrying on business as a portfolio manager outside of Canada:
(Yes/No)?   NO  

3.                                      If the answer to 2(b) above was “Yes”, the undersigned certifies that:

(a)                                 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;

(b)                                 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;

(c)                                  it was not created solely or primarily for the purpose of purchasing securities of the Issuer;

(d)                                 the total asset value of the investment portfolios it manages on behalf of clients is not less than $20,000,000; and

(e)                                  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.

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4.                                      If the answer to 2(a). above was “No”, please provide the names and addresses of Control Persons of the Placee:

*     If the Control Person is not an individual, provide the name of the individual that makes the investment decisions on behalf of the Control Person.

5.                                      Acknowledgement - Personal Information and Securities Laws

(a)                                 “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:

(i)                                    the disclosure of Personal Information by the undersigned to the Exchange (as defined in Appendix 6B) pursuant to this Form; and

(ii)                                  the collection, use and disclosure of Personal Information by the Exchange for the purposes described in Appendix 6B or as otherwise identified by the Exchange, from time to time.

(b)                                 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.

Dated and certified (if applicable), acknowledged and agreed, at                            on September                     2015.

THIS IS NOT A PUBLIC DOCUMENT

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SCHEDULE “C”

TSX Venture Exchange Inc. and its affiliates, authorized agents, subsidiaries and divisions, including the TSX Venture Exchange (collectively referred to in this Schedule as the “Exchange”) collect Personal Information (defined as any information about an identifiable individual, and includes information provided by the Purchaser in this Subscription Agreement) in certain forms that are submitted by the individual and/or by an Issuer or Applicant and use it for the following purposes:

(a)         to conduct background checks;

(b)         to verify the Personal Information that has been provided about each individual;

(c)          to consider the suitability of the individual to act as an officer, director, insider, promoter, investor relations provider or, as applicable, an employee or consultant, of the Issuer or Applicant;

(d)         to consider the eligibility of the Issuer or Applicant to list on the Exchange;

(e)          to provide disclosure to market participants as to the security holdings of directors, officers, other insiders and promoters of the Issuer, or its associates or affiliates;

(f)           to conduct enforcement proceedings; and

(g)          to perform other investigations as required by and to ensure compliance with all applicable rules, policies, rulings and regulations of the Exchange, securities legislation and other legal and regulatory requirements governing the conduct and protection of the public markets in Canada.

As part of this process, the Exchange also collects additional Personal Information from other sources, including but not limited to, securities regulatory authorities in Canada or elsewhere, investigative, law enforcement or self-regulatory organizations, regulations service providers and each of their subsidiaries, affiliates, regulators and authorized agents, to ensure that the purposes set out above can be accomplished.

The Personal Information the Exchange collects may also be disclosed:

(a)         to the agencies and organizations in the preceding paragraph, or as otherwise permitted or required by law, and they may use it in their own investigations for the purposes described above; and

(b)         on the Exchange’s website or through printed materials published by or pursuant to the directions of the Exchange.

The Exchange may from time to time use third parties to process information and/or provide other administrative services.  In this regard, the Exchange may share the information with such third party service providers.

Exhibit 3

CONFIDENTIAL

DELIVERY VIA EMAIL

September 13, 2015

Timberline Resources Corporation

101 E. Lakeside

Coeur d’Alene, ID 83814

Attention:                     Kiran Patankar, President & Chief Executive Officer

Bill Sheriff, Chairman

Re:                 Proposed acquisition (the “Proposed Transaction”) by Waterton Precious Metals Fund II Cayman, LP (together with its subsidiaries, the “Offeror”) of all of the issued and outstanding shares of Timberline Resources Corporation (“TRC” or the “Company”, and together with the Offeror, the “Parties”)

Dear Mr. Patankar:

The purpose of this letter agreement (the “Letter Agreement”) is to set forth the principal terms and conditions of the Proposed Transaction by which the Offeror shall purchase, in cash, all of the issued and outstanding shares (the “Shares”) of the Company for $0.58 per share (the “Offer Price”), and to facilitate the good-faith negotiation and settlement of Definitive Agreements (as defined below) evidencing the Proposed Transaction. The Proposed Transaction represents an aggregate offer price (the “Aggregate Offer Price”) of approximately $7,000,000 and represents a premium of 93% over the closing price per common share of TRC on the NYSE MKT on September 3, 2015.

The Offeror’s current intention is to structure the Proposed Transaction by way of a take-over bid, although it is open to considering other structures. As conditions precedent to the closing of the Proposed Transaction, amongst other matters, the Offeror must be satisfied (in its sole and absolute discretion) with the results of its due diligence review.

1.                                      The Proposed Transaction

1.1                               The Parties agree that the Parties will effect the Proposed Transaction pursuant to the terms and conditions of (i) an irrevocable lock-up agreement (collectively, the “Lock-up Agreements”) with each of (a) the directors and officers of TRC that directly or indirectly own or control any Shares and (b) such other principal shareholders of TRC as the Offeror may reasonably select, and (ii) a support agreement (the “Support Agreement”, and together with the Lock-up Agreements, the “Definitive Agreements”) with TRC.

1.2                               The Offeror anticipates closing the Proposed Transaction as soon as practicable. In addition to any other conditions precedent described in the Definitive Agreements, the closing of the Proposed Transaction shall be subject to the following conditions precedent customary for transactions of this nature:

(i)            the valid receipt of all federal, state, provincial and local approvals (regulatory and otherwise), authorizations, consents and exemptions necessary for the valid and legal completion of the Proposed Transaction and the Definitive Agreements;

(ii)           the valid receipt of all applicable approvals for the valid and legal completion of the Proposed Transaction under applicable corporate and securities laws;

(iii)          the deposit of that number of Shares under the bid which would constitute at least 662/3% (on a fully-diluted basis) of the issued and outstanding Shares; and

(iv)          no material adverse effect.

1.3                               The Support Agreement will provide that the board of directors of TRC (the “Board”) will unanimously recommend that TRC’s shareholders accept the take-over bid (subject to the Board’s fiduciary duties) and will contain customary ordinary course of business covenants, including restrictions on the issuance of Shares and securities convertible into Shares (including options). The Support Agreement shall also include certain deal protection mechanisms that shall be negotiated amongst the Company and the Offeror, acting reasonably and shall also contemplate the Offeror honoring certain change of control payments that may become due and payable to TRC’s officers and employees should the Parties close the Proposed Transaction.

1.4                               The Offeror agrees to provide, at the option of the Company, pre-transaction financing, which financing shall consist of a private placement of 1,331,861 shares of common stock of the Company at a price of US$0.375 per share, for total proceeds of US$499,447.87 (the “Private Placement”). The Parties hereby agree that the closing of the Private Placement is conditional upon the TSX Venture Exchange (the “Canadian Exchange”) approving the pricing of the Private Placement, and the closing of the Private Placement shall occur within ten (10) days of the date upon which this Letter Agreement is executed by both Parties.  If the Private Placement does not close within ten (10) days of the date upon which this Letter Agreement is executed by both Parties, this Letter Agreement shall automatically terminate and shall be of no further force and effect. The Parties agree that subject to compliance with applicable law and, if required, the acceptance of the Canadian Exchange, pursuant to the terms of the documents relating to the Private Placement, the Offeror shall have the right (the “Participation Right”), but not the obligation, to acquire, on a pro rata basis, Shares or securities convertible into Shares (collectively, the “Equity Securities”) if at any time following the closing of the Private Placement and for any reason (whether in respect of a private or public offering of securities or in connection with a corporate transaction or otherwise) the Company issues Equity Securities (each, an “Equity Issuance”). In the foregoing circumstances, the Offeror shall have the right, but not the obligation, to acquire that number of Equity Securities on the same terms as the Equity Issuance that would cause it to maintain the same percentage equity interest in the Company that it possesses immediately prior to the closing of the Equity Issuance such that the Offeror does not suffer any equity dilution. The Company hereby acknowledges that it shall not close any Equity Issuance prior to providing the Offeror with the opportunity to exercise its Participation Right.

2.                                      Due Diligence

2.1                               The Company agrees that commencing on the business day after the Company executes this Letter Agreement, it will permit the Offeror and its representatives and other persons designated by the Offeror, at all reasonable times, to have access to the Company, its assets, its management and its representatives and will provide the Offeror with all such information and material concerning the Company, its subsidiaries and their assets as the Offeror may from time to time

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request in order to assess the Proposed Transaction. The due diligence investigations will include, but will not be limited to, site visits (on dates which shall be mutually agreed-upon by the Parties) and a complete review of the Company’s financial, legal, tax and environmental records and agreements, and such other matters as the Offeror may deem relevant in order to assess the Proposed Transaction. The Offeror shall indemnify the Company and its directors, officers, employees, agents, shareholders and representatives from any liability arising out of the gross negligence or wilful misconduct of the Offeror’s representatives related to such site visits.

3.                                      Exclusivity

3.1                               In consideration of the expenses and time commitment that the Offeror will incur in connection with the Proposed Transaction, the Company agrees that for a period ending on the date that is thirty (30) calendar days following the date of receipt by the Offeror of access to the materials indentified in Appendix “A” hereto (the “Exclusivity Period”), neither the Company nor any of its advisers, representatives, officers, employees, directors, agents, subsidiaries or affiliates (all such persons and entities, collectively, the “TRC Group”) shall initiate, solicit, entertain, negotiate, accept or discuss, directly or indirectly, any proposal or offer from any person or group of persons other than the Offeror to acquire, joint venture or finance all or any part of the business, assets or properties of the Company or any capital stock or capital stock equivalents of corporate entities within TRC Group (whether by takeover bid, merger, purchase of stock, purchase of assets, tender offer, joint venture agreements, debt financings (or debt financing equivalent transactions), equity financings, royalty arrangements or otherwise) (an “Alternative Proposal”) or provide any non-public information to any third party in connection with an Alternative Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Proposed Transaction with the Offeror. Each member of the TRC Group agrees to immediately notify the Offeror if it receives any indication of interest, request for information or offer in respect of an Alternative Proposal, and will communicate to the Offeror in reasonable detail the terms of any such indication, request or offer, and will provide the Offeror with copies of all written communications relating to any such indication, request or offer. Immediately upon the execution of this Letter Agreement, each member of the TRC Group shall terminate any and all existing discussions or negotiations with any person or group of persons other than the Offeror regarding an Alternative Proposal. Each member of the TRC Group represents and warrants to the Offeror that it is not party to or bound by any agreement with respect to an Alternative Proposal.

4.                                      Termination and Break Fee

4.1                               Unless otherwise set forth herein, this Letter Agreement shall terminate upon the earlier of (i) the conclusion of the Exclusivity Period if the Definitive Agreements have not been executed prior to such date, (ii) the date upon which the Offeror notifies the Company, in writing, that it does not wish to move forward with the Proposed Transaction, and (iii) the execution of the Definitive Agreements; provided that Sections 4, 5, 6, 7, 8 and 9 hereof shall survive the termination or expiry of this Letter Agreement.

4.2                               Notwithstanding anything to the contrary in this Letter Agreement, should the Company announce, complete or otherwise enter into an agreement (whether binding or non-binding) in respect of an Alternative Proposal on any date (as applicable, the “Alternative Transaction Date”) during the period commencing on the business day on which the Company executes this Letter Agreement and ending ninety (90) calendar days after the expiration of the Exclusivity Period, the Company shall, within ten (10) calendar days of the Alternative Transaction Date, pay to the Offeror an amount equal to five percent (5%) of the Aggregate Offer Price (the “Break

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Fee”). For the avoidance of doubt, no Break Fee shall be payable by the Company to the Offeror if the Offeror has notified the Company, in writing, that it does not wish to move forward with the Proposed Transaction.

5.                                      Confidentiality

5.1                               This Letter Agreement, the contents of this Letter Agreement and the information exchanged by the Parties in connection with this Letter Agreement and the Proposed Transaction, are intended for the exclusive use of the Parties and shall not be disclosed by the Parties to any person other than to each Party’s legal and financial advisors for the purpose of reviewing the Proposed Transaction and completing the Definitive Agreements. Disclosure to third parties not expressly contemplated under this Section 5 may only occur in accordance with the terms and conditions of this Letter Agreement or with the prior written consent of the non-disclosing Parties. The confidentiality obligations described in this Section 5 shall terminate one (1) year after the date of execution of this Letter Agreement.

5.2                               Notwithstanding anything to the contrary in this Letter Agreement, the confidentiality obligations described in this Section 5 shall not apply to disclosure that is required under applicable law, provided that (i) TRC shall not publish or otherwise use the Offeror’s name without the Offeror’s prior written consent (which may be unreasonably withheld), and/or (ii) prior to making any disclosure pursuant to applicable law, the Party that is under an obligation to make such disclosure shall agree upon the proposed content of such disclosure with the other Party.

6.                                      Costs

6.1                               Each of the Parties shall be responsible for and shall bear its own costs and expenses (including any broker’s or finder’s fees and the expenses of its representatives) incurred at any time in connection with (i) this Letter Agreement, (ii) negotiating, pursuing or completing the Proposed Transaction and the Definitive Agreements, and (iii) any matters relating thereto.

7.                                      Governing Law

7.1                               This Letter Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

8.                                      Binding Nature

8.1                               Other than Sections 1.4, 2, 3, 4, 5, 6, 7, 8, and 9 hereof, which are intended to be legally binding, this Letter Agreement is an expression of interest only and does not constitute a legally binding agreement between the Parties. This Letter Agreement does not constitute a binding commitment or obligation on the part of any Party to proceed with the Proposed Transaction, and any such binding commitment or obligation will be set forth only in the Definitive Agreements; provided, however, that each of the Parties agrees to make all commercially reasonable efforts to negotiate and settle the Definitive Agreements by the end of the Exclusivity Period.

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9.                                      Miscellaneous

9.1                               This Letter Agreement will enure to the benefit of and be binding upon the Parties and their respective heirs, executors, administrators, successors and permitted assigns.

9.2                               The Company may not assign or transfer any of its rights or obligations under this Letter Agreement without the prior written consent of the Offeror. The Offeror may assign and transfer its rights and obligations to an affiliate without the prior written consent of the Company.

9.3                               This Letter Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which shall together constitute one and the same instrument. Delivery of a copy by facsimile or other electronic means (including email) will be deemed to be delivery of an original.

9.4                               Time is of the essence with respect to this Letter Agreement.

9.5                               This Letter Agreement constitutes the entire agreement between the Parties, and supersedes all prior agreements, understandings, representations and warranties, negotiations and discussions, whether oral or written, and course of conduct and dealing between the Parties relating to the subject matter of this Letter Agreement.

9.6                               Unless otherwise indicated, all references to dollar amounts ($) in this Letter Agreement refer to the legal currency of the United States of America.

10.                               Offeror Contacts

10.1                        The primary contact persons for the Offeror in respect of this matter are:

If this Letter Agreement is acceptable to you, please sign and return a fully-executed copy of this Letter Agreement to us by no later than 5:00pm (Toronto time) on Sunday, September 13, 2015. If not accepted by the Company by such time, this proposal shall terminate automatically without liability on the part of any Party.

We thank you for your consideration and are available at your convenience to discuss the foregoing matters. We look forward to your response.

Yours truly,

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The undersigned hereby agree to the foregoing terms and conditions of this Letter Agreement as of this 13 day of September, 2015.

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