VOTING SHAREHOLDER AGREEMENT

THIS VOTING SHAREHOLDER AGREEMENT (as such may be amended or amended and restated from time to time in writing signed by all of the parties) (this “Agreement”) is entered into as of March 14, 2013, by and between John Victor Lattimore, Jr. (“Lattimore”), Unique Materials, LLC (“Unique Materials”), Michael Parnell (“Parnell”), Matthew Hoff (“Hoff”), Kevin M. Cassidy (“Cassidy”), Daniel B. McGroarty (“McGroarty”) and Winston Marshall (“Marshall”) on the one hand (collectively referred to herein as “Lattimore Shareholders”), and H. Deworth Williams (“D. Williams”), Edward F. Cowle (“Cowle”, Geoff Williams (“G. Williams”), Children’s International Obesity Fund, Inc., a Utah corporation (“Obesity Fund”), and Blue Cap Development Corp, a Nevada corporation (“Blue Cap”) (collectively referred to herein as “Blue Cap shareholders”), on the other.

WHEREAS, the majority of outstanding common stock of the Company is owned by the Lattimore Shareholders and Blue Cap Shareholders as of the date of this Agreement;

WHEREAS, the parties believe it is in their best interests to provide for the effective governance of U.S. Rare Earths, Inc., a Nevada corporation (“USRE” or “the Company”) and desire to provide for the orderly election of members of the board of directors of the Company (“the Board”) in accordance with the terms of this Agreement;

NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

1.	Definitions.  The following defined terms, when used in this Agreement, have the respective meanings set forth below (such definitions to be equally applicable to both singular and plural forms of the terms defined):

1.1	“Board” means the Board of Directors of U.S. Rare Earths, Inc.

1.2  “Blue Cap Shareholders” means:

 

a.           Edward F. Cowle:

b.           H. Deworth Williams

c.           Geoff Williams; and

d.           Blue Cap Development Corp.

e.           Children’s International Obesity Fund, Inc.

1.3  “Lattimore Shareholders” means:

a.           John Victor Lattimore, Jr.;

b.           Unique Materials, LLC;

c.           Michael Parnell;

d.           Matthew Hoff;

e.           Kevin M. Cassidy;

f.           Daniel B. McGroarty;

g.           Winston Marshall.

1.4  “Independent Director” means an individual who is not an employee or officer of the Company or any affiliated company or subsidiary as those terms are defined and used under the federal securities laws.

 

             1.5  “Shares” means all shares of USRE common stock held by the Lattimore Shareholders and Blue Cap Shareholders (whether now or in the future) including all transferees, successors and assigns.

2.           Provisions Regarding the Board

2.1 Board Composition.  The parties agree to vote, or cause to be voted, all Shares owned by the Lattimore Shareholders and Blue Cap Shareholders, or over which a part98y has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board shall be se and remain at seven (7) directors, unless increased pursuant to the Company By-laws and applicable Nevada statute.

2.2  Voting Agreement.   On any and all matters relating to the election of members to the Company Board (including the filling of any vacancies), the parties each agree to put forth a joint slate of seven (7) nominees made up of five (5) nominees put forth by ad determined solely upon the discretion of the Blue Cap Shareholders.  The Lattimore Shareholders, including all individuals within that group, will in no event propose more than the five (5) candidates necessary to fill their allotment on the jointly proposed slate.  The Blue Cap Group, including all individuals within that group, will in no event propose more than the two (2) candidates necessary to fill their allotment on the jointly proposed slate.  The parties further agree to vote all Shares held by tem and subject to the terms of this Agreement (or the holders thereof shall consent pursuant to an action by written consent) in a manner so as to elect to the Company’s Board of Directors each and every one of the five (5) nominees contained on each and every slate of directors endorsed by the Lattimore Shareholders provided that they are qualified to serve as members of the Board of Directors under applicable state and federal laws, and the By-laws and applicable corporate governance provisions of the Company, and each and every one of the two (2) nominees contained on the joint slate of directors endorsed by the Blue Cap Shareholders, provided that they are qualified to serve as members of the Board of Directors under applicable state and federal laws, and the By-laws and applicable corporate governance provisions of the Company.

Of the five (5) nominees contained on each and every slate of directors endorsed by the Lattimore Shareholders, two (2) of the nominees shall be “independent directors” as that term is defined in Section 1.4 of this Agreement.

The parties agree to endorse each and every slate of directors endorsed by the Lattimore Shareholders and Blue Cap Shareholders so long as they are not “unable to serve” or “unfit to serve.”  As used herein, “unable to serve” shall mean medically incapacitated so as to be unable to serve as a director, and “unfit to serve” shall mean a violation of rules and laws so as to prohibit one from serving as a director of a public company under applicable state and federal laws and the By-laws and applicable corporate governance rules of the Company.  In the event of a disagreement between the Lattimore Shareholders and Blue Cap Shareholders regarding these matters, determination of either of the preceding conditions shall be decided by binding arbitration of the parties under the provisions of the American Arbitration Association (“AAA”) applying the laws of the State of Nevada and applicable venue in the Las Vegas, Nevada metropolitan area, or such other area as the majority of the parties may decide in writing.

2.3           Failure to Designate a Board Member In the8 absence of any designation from the Lattimore Shareholders or Blue Cap Shareholders, the director previously designated and then serving in such seat shall be reelected, if eligible and qualified to serve as members of the Board of Directors under applicable state and federal laws, and the By-laws and applicable corporate governance provisions of the Company.  If such individual declines or is unable to serve, such position shall remain vacant until a nomination is presented which can be voted upon in accordance with the Company’s then current Articles of Incorporation and By-laws ad applicable state and federal laws, and in a manner consistent with the terms set forth in this Agreement.

2.4           No Liability for Election of Recommended Directors.  Except as to liability for breach of this Agreement, neither the Lattimore Shareholders, Blue Cap Shareholders, nor any affiliate thereof, shall incur any liability as a result of designating an individual for election as a director for any act or omission by such designated individual in his or her capacity as a director of the Company, nor shall any liability be incurred as a result of voting for any such designee in accordance with the provisions of this Agreement.

2.6           Board Meetings.   Unless otherwise determined by the vote of a majority of the directors then in office the Board shall meet in person at least quarterly in accordance with an agreed upon schedule.  The Company shall reimburse the directors who are not employees of USRE for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board.

 

 

 

3.           Representation and Warranties.  Lattimore Shareholders and Blue Cap Shareholders hereby represent and warrant and covenants to each other as follows:

3.1           Shareholders.  Each of the Lattimore Shareholders and Blue Cap Shareholders represent and warrant that this Agreement has been duly authorized, executed and delivered by such Shareholder and constitutes the valid and binding obligation of each Shareholder, enforceable in accordance with its terms.

4.           Restrictions on Transfer of Shares

 

This Agreement shall become null and void and of no force in the event that the Settlement Agreement and Release.  Stock Purchase Agreement are not executed simultaneously herewith.

7.           Miscellaneous

7.1           Governing Law.  This Agreement shall be construed pursuant to the substantive laws of the State of Nevada, without giving effect to the principles of conflicts of laws thereof.

7.4           Titles and Subtitles   The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

       7.6           Severability   In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal or unenforceable provision shall be reformed and construed so that it will be valid, legal and enforceable to the maximum extent permitted by law.

*            *           *

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written.

 

By:	/s/ Michael Parnell		By:	/s/ Matthew Hoff
	Name: Michael Parnell			Name: Matthew Hoff
	Title:			Title:
	Date: March 14, 2013			Date: March 14, 2013

By:	/s/ Kevin M. Cassidy		By:	/s/ Daniel B. McGroarty
	Name: Kevin M. Cassidy			Name: Daniel B. McGroarty
	Title:			Title:
	Date: March 14, 2013			Date: March 14, 2013

By:	/s/ Winston Marshall
	Name: Winston Marshall
	Title:
	Date: March 14, 2013

 

 

Blue Cap Shareholders:
By:	/s/ H. Deworth Williams		By:	/s/ Edward F. Cowle
	Name: H. Deworth Williams			Name: Edward F. Cowle
	Title:			Title:
	Date: March 15, 2013			Date: March 15, 2013

				Blue Cap Development Corp.
By:	/s/ Geoff Williams		By:	/s/ Geoff Williams
	Name: Geoff Williams			Name: Geoff Williams
	Title:			Title: Secretary/ Treasurer
	Date: March 15, 2013			Date: March 15, 2013

Children’s International Obesity Fund, Inc.
By:	/s/ H. Deworth Williams
	Name: H. Deworth Williams
	Title: President
	Date: March 15, 2013