Avalon Advanced Materials Inc. — Capital/Financing Update 2023

Jun 23, 2023

Execution Copy

INVESTOR RIGHTS AGREEMENT

SCR-SIBELCO NV

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AVALON ADVANCED MATERIALS INC.

June 14, 2023

TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION................................................................................................ 5	ARTICLE 1 INTERPRETATION................................................................................................ 5
1.1	Defined Terms.............................................................................................................. 5
1.2	Rules of Construction.................................................................................................. 8
1.3	Entire Agreement......................................................................................................... 9
1.4	Time of Essence............................................................................................................ 9
1.5	Governing Law and Submission to Jurisdiction..................................................... 9
1.6	Severability................................................................................................................. 10
ARTICLE 2 BOARD OF DIRECTORS..................................................................................... 10
2.1	Nomination Right...................................................................................................... 10
2.2	Management to Endorse and Vote.......................................................................... 12
2.3	Directors’ Liability Insurance................................................................................... 12
2.4	Director Compensation............................................................................................. 12
2.5	Appointment to Technical Committees.................................................................. 12
ARTICLE 3 PARTICIPATION RIGHT................................................................................... 13
3.1	Notice of Issuances.................................................................................................... 13
3.2	Grant of Participation Right..................................................................................... 13
3.3	Top-up Offering......................................................................................................... 14
3.4	Exercise Notice........................................................................................................... 15
3.5	Issuance of Offered Securities and Top-up Shares............................................... 16
3.6	Blackout Periods......................................................................................................... 16
3.7	Issuances Not Subject to Top-up Right................................................................... 16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES.................................................... 17
4.1	Representations and Warranties of the Company................................................ 17
4.2	Representations and Warranties of the Investor................................................... 18
ARTICLE 5 COVENANTS OF THE COMPANY.................................................................. 19
5.1	Reporting Issuer Status and Listing of Common Shares..................................... 19
5.2	No Conflict With Shareholders’ Rights Plan......................................................... 19
5.3	Grant of Additional Third Party Participation Rights.......................................... 19
ARTICLE 6 RESTRICTIONS ON DISPOSITIONS................................................................ 20
6.1	Restrictions on Dispositions..................................................................................... 20

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6.2	Take-over Bids and other Change of Control Transactions................................. 20
ARTICLE 7 STANDSTILL........................................................................................................ 20
7.1	Standstill...................................................................................................................... 20
7.2	Termination of Standstill.......................................................................................... 21
ARTICLE 8 MISCELLANEOUS............................................................................................... 22
8.1	Termination................................................................................................................ 22
8.2	Right to Information.................................................................................................. 22
8.3	Notices......................................................................................................................... 22
8.4	Amendments and Waivers....................................................................................... 24
8.5	Assignment................................................................................................................. 24
8.6	Successors and Assigns............................................................................................. 24
8.7	Expenses...................................................................................................................... 24
8.8	Public Disclosure........................................................................................................ 24
8.9	Further Assurances.................................................................................................... 25
8.10	Right to Injunctive Relief.......................................................................................... 25
8.11	Counterparts............................................................................................................... 25

INVESTOR RIGHTS AGREEMENT

THIS AGREEMENT made the 14[th] day of June, 2023,

B E T W E E N:

SCR-SIBELCO NV ,

a corporation existing under the laws of Belgium,

(hereinafter referred to as the “ Investor ”),

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AVALON ADVANCED MATERIALS INC. ,

a corporation existing under the Business Corporations Act (Ontario),

(hereinafter referred to as the “ Company ”).

WHEREAS the Company and the Investor have entered into a subscription agreement dated June 14, 2023 (the “ Subscription Agreement ”) pursuant to which the Company has agreed to issue, and the Investor has agreed to purchase, (a) 109,692,764 Common Shares (as defined below) in the capital of the Company (the “ Purchased Shares ”), and (b) a C$3.0 million secured convertible promissory note of the Company (the “ Note ”);

AND WHEREAS following the acquisition of the Purchased Shares and the Note, the Investor will own 109,692,764 common shares of the Company representing 19.9% of the issued and outstanding Common Shares on a non-diluted basis;

AND WHEREAS in consideration of the Investor’s agreement to complete the subscription pursuant to the Subscription Agreement, the Company has agreed to grant certain rights set out herein to the Investor, on the terms and subject to the conditions set out herein;

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants and agreements of the parties herein contained and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged by each party), the parties agree as follows:

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ARTICLE 1 INTERPRETATION

1.1 Defined Terms

For the purposes of this Agreement, unless the context otherwise requires, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

“ Act ” means the Canada Business Corporations Act ;

“ Affiliate ” has the meaning ascribed to such term in the Act, as in effect on the date of this Agreement;

“ Agreement ” means this investor rights agreement;

“ Applicable Laws ” means with respect to any person, any domestic, foreign, federal, provincial, state, county or municipal or local law, rule or regulation, including any statute, regulation, rule or subordinate legislation or treaty or common law and any rule, decree, policy or enactment of any Governmental Authority that is binding or applicable to such Person;

“ Board ” means the board of directors of the Company;

“ Bought Deal ” means a fully underwritten offering on a bought deal basis pursuant to which an underwriter has committed to purchase securities of the Company pursuant to a “bought deal” letter prior to the filing of a preliminary prospectus or prospectus supplement or a distribution pursuant to an overnight marketed offering;

“ Business Day ” means any day, other than: (a) a Saturday, Sunday or statutory holiday in the Province of Ontario or in Belgium, or (b) a day on which banks are generally closed in the Province of Ontario or in Belgium;

“ Canadian Securities Laws ” means the applicable securities legislation of each of the provinces and territories of Canada and all published regulations, policy statements, orders, rules, instruments, rulings and interpretation notes issued thereunder or in relation thereto, as the same may hereafter be amended from time to time or replaced;

“ Common Shares ” means the common shares in the capital of the Company issued and outstanding from time to time and includes any common shares that may be issued hereafter;

“ Company ” shall have the meaning set out in the preamble hereto;

“ Confidentiality Agreement ” means the confidentiality agreement to be entered into between the Company and the Investor as contemplated herein;

“ Consents ” means all consents, approvals, permits, licences, waivers of rights of first refusal or waivers of due on sale clauses or other waivers, as applicable, from any party

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to any contract or any Governmental Authority, in each case, necessary in connection with the execution of this Agreement or the performance of any terms hereof or any document delivered pursuant hereto or the completion of any of the transactions contemplated by this Agreement;

“ Constating Documents ” means, with respect to any Person, its articles or certificate of incorporation, amendment, amalgamation or continuance, memorandum and articles of association, letters patent, supplementary letters patent, by-laws, partnership agreement, limited liability corporation or social agreement or other similar document, and all unanimous shareholder agreements, other shareholder agreements, voting trusts, pooling and/or syndicated agreements and similar contracts, arrangements and understandings applicable to the Person’s securities, all as amended, supplemented, restated and replaced from time to time;

“ Convertible Securities ” means any security convertible, exchangeable or exercisable for or into, with or without consideration, Common Shares or other equity or voting securities of the Company, including any warrants, options or other rights issued by the Company and, for greater certainty, including any securities issued under any equity incentive compensation arrangements;

“ Definitive JV Agreement ” shall have the meaning set out in Section 1.1 of the Subscription Agreement;

“ Dilutive Issuance ” shall have the meaning set out in Section 3.3(a)(i);

“ Exchange ” means the TSX or such other stock exchange where the Common Shares are listed from time to time;

“ Excluded Event ” shall have the meaning set out in Section 3.7;

“ Exercise Notice ” shall have the meaning set out in Section 3.4(a);

“ Governmental Authority ” means any: (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, ministry, central bank, court, tribunal, arbitral body, bureau or agency, domestic or foreign; (b) subdivision, agent, commission, board, or authority of any of the foregoing; or (c) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing, including any stock exchange or self-regulatory authority and, for greater certainty, the Securities Regulatory Authorities and the Exchange;

“ Investor ” shall have the meaning set out in the preamble hereto;

“ Investor Nominee ” shall have the meaning set out in Section 2.1(a);

“ Issuance ” shall have the meaning set out in Section 3.1;

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“ Joint Venture ” shall have the meaning set out in Section 1.1 of the Subscription Agreement;

“ Market Price ” means the “market price” of the Common Shares calculated in accordance with the rules of the TSX, or if the Common Shares are not traded on the TSX at the relevant time, the closing price of the Common Shares on the trading day immediately prior to the date of public announcement of the offering on such other exchange or marketplace as such shares are then traded (or at the “market price” otherwise determined pursuant to the rules of such other exchange or marketplace, if different).

“ Nomination Criteria ” shall have the meaning set out in Section 2.1(a);

“ Note ” shall have the meaning set out in the recitals;

“ Notice Period ” shall have the meaning set out in Section 3.4(a);

“ Offered Securities ” means any equity or voting securities, or securities convertible into, exercisable or exchangeable for equity or voting securities, of the Company;

“ Offering ” shall have the meaning set out in Section 3.1;

“ Offering Notice ” shall have the meaning set out in Section 3.1;

“ Ownership Percentage ” means, at any time, the percentage of Common Shares which are owned or over which the Investor and its Affiliates exercise control or direction on a non-diluted basis, which shall be calculated by dividing (y) the number of Common Shares the Investor and its Affiliates own or exercise control or direction over, by (z) the total number of Common Shares issued and outstanding at such time; provided that any Common Shares issued as a result of a Dilutive Issuance shall be disregarded and the Investor shall be deemed to own or exercise control or direction over the percentage of Common Shares it would have held at such time if such Dilutive Issuance had not occurred, unless and until the Company has delivered to the Investor a Top-up Notice in respect of such Dilutive Issuance and the Investor has either exercised or failed to exercise the Top-up Right described in the Top-Up Notice within the applicable Notice Period, in which case, the Common Shares issued in connection with such Dilutive Issuance shall be counted;

“ Participation Right ” shall have the meaning set out in Section 3.2;

“ Person ” means any individual, sole proprietorship, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, company, corporation or other body corporate, union, Governmental Authority and a natural person in his capacity as trustee, executor, administrator, or other legal representative;

“ Proposal ” shall have the meaning set out in Section 7.3;

“ Purchased Shares ” shall have the meaning set out in the recitals;

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“ Reporting Jurisdictions ” means British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, North West Territories, Yukon and Nunavut;

“ Securities Regulatory Authorities ” means the securities regulatory authority of each of the Reporting Jurisdictions and any Exchange;

“ Subscription Agreement ” shall have the meaning set out in the recitals;

“ Third Party ” means, in relation to any party, a person with whom such party deals at “arm’s length”, as such term is understood for the purposes of the Income Tax Act (Canada);

“ Third Party Participation Right ” shall have the meaning set out in Section 4.1(f);

“ Top-up Notice ” shall have the meaning set out in Section 3.3(b);

“ Top-up Offering ” shall have the meaning set out in Section 3.3(c);

“ Top-up Right ” shall have the meaning set out in Section 3.3(a)(i);

“ Top-up Shares ” shall have the meaning set out in Section 3.3(a)(i);

“ Top-up Threshold ” shall have the meaning set out in Section 3.3(a)(ii);

“ Transfer ” means to sell, transfer, grant, assign, donate, create an encumbrance, grant a right to purchase or in any other manner convey, transfer, alienate or dispose of, or commit to do any of the foregoing;

“ TSX ” means the Toronto Stock Exchange;

“ Upsize Notice ” shall have the meaning set out in Section 3.4(b); and

“ Upsize Option ” shall have the meaning set out in Section 3.4(b).

1.2 Rules of Construction

Except as may be otherwise specifically provided in this Agreement and unless the context otherwise requires, in this Agreement:

• (a) the terms “Agreement”, “this Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof;

• (b) references to an “Article” or “Section” followed by a number or letter refer to the specified Article or Section to this Agreement;

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• (c) the division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;

• (d) words importing the singular number only shall include the plural and vice versa and words importing the use of any gender shall include all genders;

• (e) the word “including” is deemed to mean “including without limitation”;

• (f) the terms “party” and “the parties” refer to a party or the parties to this Agreement;

• (g) any reference to this Agreement means this Agreement as amended, modified, replaced or supplemented from time to time;

• (h) any reference to a statute, regulation or rule shall be construed to be a reference thereto as the same may from time to time be amended, re-enacted or replaced, and any reference to a statute shall include any regulations or rules made thereunder;

• (i) all dollar amounts refer to Canadian dollars;

• (j) any time period within which a payment is to be made or any other action is to be taken hereunder shall be calculated excluding the day on which the period commences and including the day on which the period ends; and

• (k) whenever any action is required to be taken or period of time is to expire on a day other than a Business Day, such action shall be taken or period shall expire on the next following Business Day.

1.3 Entire Agreement

This Agreement and the Subscription Agreement (including all schedules thereto) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings, negotiations and discussions, whether written or oral, between the parties. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter hereof except as provided in the aforesaid agreements.

1.4 Time of Essence

Time shall be of the essence of this Agreement.

1.5 Governing Law and Submission to Jurisdiction

• (a) This Agreement shall be interpreted and enforced in accordance with, and the respective rights and obligations of the parties shall be governed by, the laws of the Province of Ontario and the federal laws of Canada applicable in that province.

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• (b) Each of the parties irrevocably and unconditionally: (i) submits to the nonexclusive jurisdiction of the courts of the Province of Ontario over any action or proceeding arising out of or relating to this Agreement; (ii) waives any objection that it might otherwise be entitled to assert to the jurisdiction of such courts; and (iii) agrees not to assert that such courts are not a convenient forum for the determination of any such action or proceeding.

1.6

Severability

If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

ARTICLE 2 BOARD OF DIRECTORS

2.1 Nomination Right

• (a) For so long as the Investor’s Ownership Percentage is at least 10% the Investor shall be entitled to nominate one individual for appointment or election as a director of the Company (an “ Investor Nominee ”), in accordance with Section 2.1(f) of this Agreement and, if the size of the Board is increased to nine or more directors, the Investor shall be entitled to nominate one additional Investor Nominee for election or appointment to the Board, provided that such Investor Nominee(s) consents to being a director as required by the Act, is acceptable to the Exchange (including through the filing and clearing of a Personal Information Form with the Exchange, if required), and is not disqualified from being a director under the Act or by the applicable Canadian securities regulatory authorities (such conditions referred to as the “ Nomination Criteria ”). In addition, the Investor Nominee proposed by the Investor shall be made only after consultation with the Chairman and Chief Executive Officer of the Company and shall be made taking into consideration the skillsets and expertise most valuable to the Company at that time. For clarity, such consultation shall not give the Chairman and Chief Executive Officer of the Company any consent right over the Investor’s Investor Nominee, and the Investor shall be entitled to nominate their Investor Nominee in their sole discretion.

• (b) The Company covenants and agrees, subject to the approval of the Exchange, if required, upon 10 Business Days’ written notice by the Investor to the Company, to forthwith take all necessary steps, acting reasonably, including increasing the size of the Board, causing the resignation of an existing director of the Company, or filing a notice of meeting and record date for the purposes of setting and holding

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a meeting of shareholders of the Company for the election of the Investor Nominee in order to effect the appointment of the Investor Nominee.

• (c) If at any time a meeting of the shareholders of the Company is required to give effect to this ARTICLE 2, the Company shall advise the Investor of the date on which proxy solicitation materials are to be mailed for the purpose of any meeting of shareholders at which directors of the Company are to be elected at least 30 days prior to such mailing date, the Investor shall advise the Company of its Investor Nominee(s), if any, at least 15 Business Days prior to the mailing date, and the Company shall present such individual as part of management’s list of director nominees (subject to the consultation obligation and Nomination Criteria set forth in Section 2.1(a) above). If the Investor does not advise the Company of the identity of any Investor Nominee prior to any such deadline, then the Investor will be deemed to have waived its rights in the case of the initial nominee or nominated its incumbent nominee thereafter.

• (d) In the event that any Investor Nominee shall cease to serve as a director of the Company, whether due to such Investor Nominee’s death, disability, resignation or removal, the Company shall cause the Board to promptly appoint a replacement Investor Nominee designated by the Investor to fill the vacancy created by such death, disability, resignation or removal, provided that the Investor remains eligible to designate an Investor Nominee pursuant to Section 2.1(a).

• (e) Any Investor Nominee shall be entitled to disclose to the Investor any information or documentation received by such Investor Nominee in his or her capacity as a member of the Board unless the Board determines, in its good faith judgment, that such information or documentation relates to a matter in respect of which an actual or perceived conflict of interest exists between the Company and the Investor and the Investor Nominee is specifically instructed by the Board that he or she is not permitted to make such disclosure to the Investor. The Investor further acknowledges and agrees to preserve the confidentiality of any information or documentation received from the Investor Nominee, to treat all information provided to it from the Investor Nominee (whether disclosed in writing, orally, visually, electronically or by any other means) as Confidential Information (as such term will be defined in the Confidentiality Agreement) in accordance with the terms of the Confidentiality Agreement, and acknowledges and agrees that upon receiving such information, the Investor and its Affiliates (and their respective representatives) may be considered to be in a “special relationship” with the Company pursuant to the Securities Act (Ontario).

• (f) An Investor Nominee nominated by the Investor pursuant to this ARTICLE 2 need not be “independent” within the meaning of National Instrument 52-110 – Audit Committees (“ NI 52-110 ”) provided that the Investor Nominee will not result in the Company ceasing to have a Board comprised of less than a majority of “independent” directors in order to ensure compliance with the independence and committee composition requirements of the Exchange and of applicable Canadian Securities Law.

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• (g) Upon the appointment or election as a director of the Company of the Investor Nominee the Company and Investor shall enter into the Confidentiality Agreement, in a form acceptable to the parties, acting reasonably.

2.2

Management to Endorse and Vote

• (a) The Company shall use commercially reasonable efforts to ensure that the Investor Nominee(s) (as applicable) are elected to the Board, including soliciting proxies in support of their election and taking the same actions taken by the Company to ensure the election of the other nominees selected by the Board for election to the Board, provided, however, that the Company shall have no obligation to hire any third party solicitation agent.

• (b) The Company agrees that management of the Company shall, in respect of every meeting of the shareholders at which directors of the Company are to be elected, and at every reconvened meeting following an adjournment thereof or postponement thereof, endorse and recommend the Investor Nominee(s) (as applicable) identified in the proxy materials for election to the Board, and shall vote the Common Shares and any other shares of the Company entitled to vote in the election of directors in respect of which management is granted a discretionary proxy in favour of the election of such Investor Nominee(s) (as applicable) to the Board at every such meeting.

• (c) Forthwith following any meeting of shareholders at which an Investor Nominee was nominated to serve as a director but was not validly elected by the shareholders in accordance with the Act, the Company shall take all steps necessary to appoint an Investor Nominee to the Board who shall be a Person eligible to serve as a director pursuant to the Act and who is not the same individual who was not elected at the meeting of shareholders including pursuant to the power of the Board to appoint additional directors between shareholders’ meetings or to fill a vacancy on the Board.

2.3

Directors’ Liability Insurance

An Investor Nominee shall be entitled to the benefit of any directors’ liability insurance and indemnity to which other directors of the Company are entitled.

2.4 Director Compensation

In the event that an Investor Nominee is not a director, officer or employee of the Investor, such Investor Nominee shall be entitled to receive the same compensation, options, or other equity awards, as such awards may be granted to any other director from time-to-time by the Company as compensation for services rendered as a member of the Board.

2.5 Appointment to Technical Committees

In the event that the Company forms a technical committee of the Board, any one Investor Nominee shall be appointed to such committee, if so requested by the Investor in writing and it

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is determined by the Board, acting reasonably, that such Investor Nominee possesses the necessary qualifications and experience to be a member of the technical committee, within five Business Days’ of such request.

ARTICLE 3 PARTICIPATION RIGHT

3.1 Notice of Issuances

For so long as the Investor’s Ownership Percentage is at least 10%, if the Company proposes to issue (the “ Issuance ”) any Offered Securities pursuant to a public offering or a private placement for cash (each, an “ Offering ”) at any time after the date hereof, the Company shall, as soon as possible after the public announcement of the Offering, but in any event not later than: (i) the date on which the Company files a preliminary prospectus, registration statement or other offering document in connection with an Issuance that constitutes a public offering of Offered Securities; and (ii) five Business Days prior to the expected completion date of the Issuance, give written notice of the Issuance (the “ Offering Notice ”) to the Investor including, to the extent known by the Company, full particulars of the Offering, including the number of Offered Securities, the rights, privileges, restrictions, terms and conditions of the Offered Securities, the price per Offered Security to be issued under the Offering, the expected use of proceeds of the Offering and the expected closing date of the Offering. The Offering Notice shall also include copies of any investor presentation, prospectus or offering memorandum or similar disclosure document, subscription agreement and other materials delivered by or proposed to be delivered by the Company (or by any agent or investment dealer acting on behalf of the Company) to potential subscribers under the Offering.

3.2 Grant of Participation Right

The Company agrees that, for as long as the Investor’s Ownership Percentage is at least 10%, the Investor (directly or through an Affiliate) has the right (the “ Participation Right ”) to subscribe for and to be issued as part of an Offering at the subscription price per Offered Security pursuant to the Offering and otherwise on substantially the terms and conditions of the Offering (provided that, if the Investor is prohibited by Canadian Securities Laws or other Applicable Laws or the rules of any stock exchange from participating on substantially the terms and conditions of the Offering, the Company shall use commercially reasonable efforts to enable the Investor to participate on terms and conditions that are as substantially similar as circumstances permit):

• (a) in the case of an Offering of Common Shares, up to such number of Common Shares that will allow the Investor to maintain or acquire, as applicable, up to the Ownership Percentage that is the same as the Ownership Percentage that the Investor had immediately prior to completion of such Offering; and

• (b) in the case of an Offering of Offered Securities (other than an Offering comprised of only Common Shares), up to such number of Offered Securities that will (after giving effect to the Offering and assuming, for all purposes of this Section 3.2(b), the conversion, exercise or exchange of all of the convertible, exercisable or exchangeable Convertible Securities issued in connection with the Offering and issuable pursuant to this Section 3.2) allow the Investor to maintain or acquire, as

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applicable, up to the Ownership Percentage that is the same as the Ownership Percentage that the Investor had immediately prior to completion of such Offering.

For greater certainty, the parties acknowledge any future exercise of the Investor’s Participation Right shall remain subject to the other requirements of the TSX (including Sections 607(g)(ii) of the TSX Company Manual) and any requirement for approval by shareholders of the Company under any other requirement of the TSX that applies to such transaction.

3.3 Top-up Offering

• (a) Without limiting Section 3.2, for so long as the Investor’s Ownership Percentage is at least 10%, the Company agrees that, subject to the terms of this Section 3.3:

• (i) subject to Sections 3.3(a)(ii) and 3.3(b), the Investor (directly or through an Affiliate) has the right (the “ Top-up Right ”) to subscribe for and to be issued in connection with the issuance of Common Shares in respect of which an Offering Notice is not provided (including in connection with the conversion, exercise or exchange of Convertible Securities issued prior to or after the date of this Agreement) (a “ Dilutive Issuance ”) up to such number of Common Shares that will allow the Investor to maintain or acquire up to the Ownership Percentage that is the same as Ownership Percentage that the Investor would have had but for the Dilutive Issuance referenced in the Top-Up Notice (the “ Top-up Shares ”); and

• (ii) the Top-up Right shall be exercisable from time to time following Dilutive Issuances that result in the reduction of the Investor’s Ownership Percentage by an aggregate of 1.0% or more (the “ Top-up Threshold ”). The Top-up Threshold shall be calculated by aggregating all Dilutive Issuances that occurred in each case from the later of (A) the date of this Agreement, (B) the date of the last Top-up Notice, and (C) the date of completion of the last Top-up Offering.

• (b) Subject to Sections 3.3(d) and 3.6, within 10 Business Days of the end of each six month period ending December 31 and June 30 during which one or more Dilutive Issuances have occurred resulting in the Top-up Threshold being achieved, the Company shall deliver a written notice (a “ Top-up Notice ”) to the Investor containing the number of Common Shares issued in connection with any Dilutive Issuance and the total number of issued and outstanding Common Shares following such Dilutive Issuances, in each case from the later of (A) the date of this Agreement, (B) the date of the last Top-up Notice, and (C) the date of completion of the last Top-up Offering.

• (c) If the Investor delivers an Exercise Notice in accordance with Section 3.4, the Company shall in accordance with the provisions of this Article 3, promptly, and in any event within 30 days of the date on which the Top-up Notice was delivered, subject to the approval of the TSX, complete an offering to the Investor by way of private placement of the number of Top-up Shares the Investor wishes to subscribe for pursuant to the Top-up Right, as specified in the Exercise Notice, at an offering

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price per Top-up Share equal to the Market Price of the Common Shares on the date the Top-up Notice was delivered to the Investor in the case of a Dilutive Issuance (each, a “ Top-up Offering ”). For greater certainty, each Top-up Offering will be an offering of Common Shares.

• (d) Notwithstanding Section 3.3(a), 3.3(b), or 3.3(c), if a Top-up Threshold is achieved in, or it is determined by the Company, acting reasonably, that a Top-up Threshold is likely to be achieved prior to the end of the period in respect of which a Top-up Notice is required, then prior to setting the record date for any meeting of shareholders, the Company shall deliver a Top-up Notice to the Investor and, if the Investor delivers an Exercise Notice in accordance with Section 3.4 in response to a Top-up Notice delivered pursuant to this Section 3.3(d), the Company shall in accordance with the provisions of this Article 3, promptly, and in any event prior to declaring the record date for such shareholder meeting, complete a Top-up Offering to the Investor.

3.4 Exercise Notice

• (a) If the Investor wishes to exercise the Participation Right or the Top-up Right, the Investor shall give written notice to the Company (the “ Exercise Notice ”) of its intention to exercise such right and of the number of Offered Securities or Top-up Shares the Investor wishes to subscribe for and purchase pursuant to the Participation Right or the Top-up Right, as applicable. The Investor shall deliver an Exercise Notice to subscribe to the Offering or issuance of Top-up Shares, within five Business Days after the date of receipt of an Offering Notice, Top-up Notice or Upsize Notice, as applicable, or in the case of a public offering that is a Bought Deal, within one Business Day of receipt of an Offering Notice or Upsize Notice (the “ Notice Period ”), failing which the Investor will not be entitled to exercise the Participation Right or the Top-up Right in respect of such Offering, Issuance or issuance of Top-up Shares. In the case of an Offering that is a Bought Deal public offering, unless otherwise agreed to between the underwriters and the Company prior to the announcement of such Offering, the Offered Securities that the Investor elects to purchase shall be issued in a concurrent private placement, subject to Applicable Laws.

• (b) If the Company at any time proposes to increase the number of any Offered Securities to be issued in an Offering it shall, by notice in writing delivered to the Investor (the “ Upsize Notice ”), give the Investor the option to subscribe for its pro rata share of the additional Offered Securities (the “ Upsize Option ”). The Investor shall be entitled to exercise the Upsize Option by delivering a new Exercise Notice to the Company. If no new Exercise Notice is delivered by the Investor to the Company within two Business Days of receipt by the Investor of the Upsize Notice, the Exercise Notice of the Investor delivered in respect of the original Offering Notice shall continue in full force and effect.

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3.5 Issuance of Offered Securities and Top-up Shares

• (a) If the Company receives an Exercise Notice from the Investor within the Notice Period, then the Company shall, subject to:

• (i) the receipt and continued effectiveness of all required approvals (including the approval(s) of the Exchange and any required approvals under Canadian Securities Laws and any shareholder approval required under Applicable Laws), which approvals the Company shall use all commercially reasonable efforts to promptly obtain (including by applying for any necessary price protection confirmations, seeking shareholder approval (if required) in the manner described below; and

• (ii) the completion of the relevant Offering, if applicable,

issue to the Investor or its nominee, against payment of the subscription price payable in respect thereof, that number of Offered Securities or Top-Up Shares, as applicable, set out in the Exercise Notice.

• (b) If the Company is required by the Exchange or otherwise under Applicable Laws to seek shareholder approval for the issuance of the Offered Securities or the Topup Shares, as applicable, to the Investor or its nominee, then the Company shall: (i) call and hold a meeting of its shareholders to consider the issuance of the Offered Securities or the Top-up Shares, as applicable, to the Investor as soon as reasonably practicable, and in any event such meeting shall be held within 75 days after the date that the Company is first advised by the Exchange or other applicable Governmental Authority that it will require shareholder approval; and (ii) recommend approval of the issuance of the Offered Securities or the Top-up Shares, as applicable, to the Investor and solicit proxies in support thereof; provided, however, that the Company shall have no obligation to hire any third party solicitation agent.

3.6 Blackout Periods

In relation to any exercise periods for the Investor to elect to exercise the Top-Up Right to acquire the Top-up Shares, to the extent that the Investor is restricted from trading in securities of the Company under Canadian Securities Laws or other Applicable Laws or Company black-out or trading policies, the relevant exercise period shall be extended until the second Business Day following the termination of such restriction, provided, however, that where a Top-up Notice is delivered prior to the commencement of, or during, a black-out period, the relevant Top-up Shares shall be issued to the Investor no more than 10 Business Days following the end of the intervening black-out period.

3.7 Issuances Not Subject to Top-up Right

Notwithstanding anything to the contrary contained herein, Sections 3.3 to 3.5 will not apply to any Issuances in the following circumstances (each such Issuance pursuant to paragraphs (a) through (c) hereof being referred to as an “ Excluded Event ”):

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• (a) a rights offering that is open to all shareholders of the Company including the Investor;

• (b) any share split, capital reorganization (including a consolidation) or share dividend of the Company, provided that the beneficial shareholders of the Company and the percentage ownership interest of each beneficial shareholder of the Company do not change as a result thereof; or

• (c) an Offering of Offered Securities in respect of which the Investor has been offered the Participation Right (or the exercise of Convertible Securities issued in connection therewith).

ARTICLE 4 REPRESENTATIONS AND WARRANTIES

4.1 Representations and Warranties of the Company

The Company represents and warrants to the Investor as follows and acknowledges and agrees that the Investor is relying on such representations and warranties to enter into this Agreement:

• (a) the Company is duly incorporated and organized, and is validly subsisting, under the laws of Canada and is up-to-date in the filing of all corporate and similar returns under the laws of that jurisdiction;

• (b) the Company has all necessary corporate power and authority to enter into this Agreement and to perform its obligations hereunder;

• (c) all necessary corporate action has been taken by the Company to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder;

• (d) this Agreement has been duly executed and delivered by the Company and (assuming due execution and delivery by the Investor) constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction;

• (e) the execution and delivery of this Agreement by the Company and the performance by the Company of its obligations hereunder will not (whether after the passage of time or notice or both) conflict with, result in a violation or breach of, constitute a default or require any Consent (other than such as has already been obtained) to be obtained under, or give rise to any termination rights or payment obligation under, any provision of:

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• (i) to the knowledge of the Company, (A) any judgment, decree, order or award of any Governmental Authority having jurisdiction over it, or (B) any Applicable Law;

• (ii) any provision of its Constating Documents or resolutions of the Board (or any committee thereof) or shareholders; or

• (iii) any license or registration or any agreement, contract or commitment, written or oral which the Company is a party or subject to or bound by; and

• (f) as at the date hereof, no Person has any pre-emptive right, participation right or other right to purchase any of the Common Shares or Convertible Securities of the Company in respect of any Offering (a “ Third Party Participation Right ”).

4.2 Representations and Warranties of the Investor

The Investor represents and warrants to the Company as follows and acknowledges and agrees that the Company is relying on such representations and warranties to enter into this Agreement:

• (a) the Investor is duly incorporated and organized, and is validly subsisting, under the laws of Belgium and is up-to-date in the filing of all corporate and similar returns under the laws of that jurisdiction;

• (b) the Investor has all necessary corporate power and authority to enter into this Agreement and to perform its obligations hereunder;

• (c) all necessary corporate action has been taken by the Investor to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder;

• (d) this Agreement has been duly executed and delivered by the Investor and (assuming due execution and delivery by the Company) constitutes a legal, valid and binding obligation of the Investor, enforceable against it in accordance with its terms, except as that enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction; and

• (e) the execution and delivery of this Agreement by the Investor and the performance by the Investor of its obligations hereunder will not (whether after the passage of time or notice or both) conflict with, result in a violation or breach of, constitute a default or require any Consent (other than such as has already been obtained) to be obtained under, or give rise to any termination rights or payment obligation under, any provision of:

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• (i) to the knowledge of the Investor, (A) any judgment, decree, order or award of any Governmental Authority having jurisdiction over it, or (B) any Applicable Law;

• (ii) any provision of its Constating Documents or resolutions of its board of directors (or any committee thereof) or shareholders; or

• (iii) any license or registration or any agreement, contract, commitment, written or oral which the Investor is a party or subject to or bound by.

ARTICLE 5 COVENANTS OF THE COMPANY

5.1 Reporting Issuer Status and Listing of Common Shares

The Company shall during the term of this Agreement use commercially reasonable efforts to:

• (a) maintain the Company’s status as a “reporting issuer” not in default under the Canadian Securities Laws in each of the Reporting Jurisdictions; and

• (b) maintain the listing of the Common Shares on the TSX or another stock exchange acceptable to the Investor, acting reasonably,

provided that these covenants shall not restrict or prevent the Company from engaging in or completing any transaction which would result in the Company ceasing to be a “reporting issuer” or the Common Shares ceasing to be listed on any of the foregoing stock exchanges so long as the holders of Common Shares receive cash or securities of an entity which is listed on any of the foregoing stock exchanges or the holders of the Common Shares have approved the transaction.

5.2 No Conflict With Shareholders’ Rights Plan

The Company covenants and agrees that any shareholder rights plan or similar instrument that has been or may be adopted by the Company shall not restrict, limit, prohibit or conflict with the exercise by the Investor of its Participation Right or Top-up Right.

5.3 Grant of Additional Third Party Participation Rights

If the Investor’s Ownership Percentage is at least 10% and the Company grants to any Person a Third Party Participation Right on terms that are more favourable to such Person than the terms of the Participation Right under Article 3 are to the Investor, the Company shall promptly, but no later than three Business Days after granting such Third Party Participation Right: (i) notify the Investor in writing of such Third Party Participation Right; and (ii) deliver a copy of the relevant portions of the contract or agreement pursuant to which the Person has been granted or may exercise such Third Party Participation Right; and (iii) amend, at the Investor’s election, the terms of this Agreement to provide the Investor with a participation right that is substantially equivalent (on a pro rata basis based on the Investor’s Ownership Percentage) to the Third Party Participation Right.

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ARTICLE 6 RESTRICTIONS ON DISPOSITIONS

6.1 Restrictions on Dispositions

Subject to Section 6.2, for so long as the Investor’s Ownership Percentage is at least 10%, if the Investor or any of its Affiliates wishes to sell in the aggregate, in one transaction or a series of related transactions, 5% or more of the then issued and outstanding Common Shares (other than a proposed sale to a person that is an Affiliate of the Investor) (the “ Sale Shares ”), the Investor shall notify the Company in writing of its desire to sell the Sale Shares (the “ Sale Notice ”), which Sale Notice shall set out the terms and conditions relating to the proposed disposition. The Company shall thereafter have 30-calendar days from receipt of the Sale Notice to assist the Investor in identifying one or more purchasers for such Sale Shares (the “ Buyer Identification Period ”). If the Company identifies in writing one or more purchasers who are in the view of the Investor, acting reasonably, capable of closing and willing to close within the Buyer Identification Period, the Investor shall use commercially reasonable efforts to co-operate with the Company to consummate a sale to such purchaser(s). If the Company fails to identify any prospective buyers or consummate the disposition of the Sale Shares within the Buyer Identification Period, the Investor shall have no further obligations under this Section 6.1.

6.2 Take-over Bids and other Change of Control Transactions

Section 6.1 shall not apply to a tender by the Investor of Common Shares under a take-over bid or in respect of disposition of Common Shares in connection with an amalgamation, merger reorganization or arrangement that requires approval by holders of Common Shares.

ARTICLE 7 STANDSTILL

7.1 Standstill

Subject to Section 7.2, for a period beginning on the date of this Agreement and ending on the date that is 12 months from the date hereof, the Investor shall not, nor shall it permit any of its Affiliates to, nor shall it authorize, permit, assist or encourage any of its representatives to, directly or indirectly or jointly or in concert with any other Person, without the prior written consent of the Company:

• (a) acquire or agree to acquire, or make any proposal or offer to acquire, directly or indirectly or in any manner whatsoever, any securities of the Company or any of its Affiliates that would exceed 19.9% or more of the issued and outstanding securities of the Company (on a non-diluted basis), except in connection with the conversion of the Note, if applicable;

• (b) solicit or join in or in any way participate in a solicitation of proxies from shareholders or other securityholders of the Company or any of its Affiliates or otherwise attempt to influence the conduct of the shareholders or other securityholders of the Company or any of its Affiliates;

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• (c) communicate with any Person, with the purpose or effect of encouraging or supporting such shareholder or securityholder or prospective shareholder or securityholder in relation to any proposal, possible proposal, offer or possible offer for all or any part of the Common Shares or other securities of the Company or any of its Affiliates or any solicitation or possible solicitation of proxies from shareholders or other securityholders of the Company or any of its Affiliates;

• (d) solicit, initiate or engage in any discussions or negotiations regarding, or enter into any agreement, commitment or understanding regarding, or otherwise act jointly or in concert with any Person in order to propose or effect, any take-over bid, tender or exchange offer, amalgamation, merger, arrangement or other business combination involving the Company or any of its Affiliates or any other acquisition of securities or assets of the Company or any of its Affiliates;

• (e) make any director nomination or shareholder proposal with respect to the Company;

• (f) make any public disclosure of any consideration intention or plan to do any of the foregoing; or

• (g) advise, assist or encourage any other Person to do any of the foregoing, including, without limitation, by providing financing for such purpose.

7.2 Termination of Standstill

The limitations and prohibitions set forth above in Section 7.1 shall cease to apply upon a public announcement:

• (a) by the Company that it has agreed to a merger, amalgamation, arrangement or direct or indirect sale of all or substantially all of its assets or similar transaction with or to a Third Party (other than the Investor, any of its Affiliates or any person acting jointly or in concert with any of them) which, if the transaction is successfully completed, will result in the shareholders of the Company holding less than 50% of the voting securities of the resulting corporation or entity (or its parent corporation or entity, if the resulting corporation or entity is to be a whollyowned subsidiary of another corporation or entity after successful completion of the transaction);

• (b) by the Company that it has entered into an agreement with a Third Party pursuant to which the Company has agreed to support and recommend a take-over bid for the Common Shares of the Company by such Third Party (or an Affiliate of such Third Party); or

• (c) the Definitive JV Agreement is not executed by the Investor and the Company on or before September 30, 2023.

In the event that any of the exceptions under (a), (b) or (c) above are triggered, the Investor and its Affiliates shall no longer be restricted by Section 7.1 of this Agreement from taking any action

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described in paragraphs (a) through (g) of Section 7.1 of this Agreement and, for greater certainty, shall not be so restricted due to its or their possession of confidential information.

ARTICLE 8 MISCELLANEOUS

8.1 Termination

This Agreement shall terminate, and the rights and obligations of the parties hereunder shall cease immediately, without the ability to be reinstated, at such time as the Investor’s Ownership Percentage is less than 10%.

8.2 Right to Information

• (a) The Company agrees that, during the term of this Agreement, subject to the Company’s obligations and restrictions under Canadian Securities Laws, the Company shall provide the Investor with:

• (i) reasonable access to the Company’s scientific and technical data (including work plans and programs, permitting information, environmental studies and feasibility studies) and results of operations;

• (ii) written reports (including technical reports) on the status of the Company’s work programs as and when such reports are prepared (including all reports and materials made available to any technical committees established by the Company) and the Investor shall have the right to discuss such reports with management of the Company no more than on a quarterly basis per calendar year; and

• (iii) reasonable access to the Company’s team and its properties for the purpose of conducting site visits at mutually convenient dates and times to be agreed upon by the parties of up to a maximum of three times per calendar year.

• (b) The Investor agrees to treat all information provided to it pursuant to this Section 8.2 (whether disclosed in writing, orally, visually, electronically or by any other means) as Confidential Information (as such term will be defined in the Confidentiality Agreement) in accordance with the terms of the Confidentiality Agreement.

• (c) Notwithstanding the foregoing, for so long as the Definitive JV Agreement remains in force and the Investor remains the operator of the Joint Venture, the rights set forth above in this Section 8.2 will only apply in respect of information and properties that are not included in the Joint Venture.

8.3 Notices

• (a) Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered in person, transmitted by e-mail or

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similar means of recorded electronic communication or sent by registered mail, charges prepaid, addressed as follows:

• (i) in the case of the Investor:

SCR-Sibelco NV Plantin & Moretuslei, 1A 2018 Antwerp, Belgium

Attention: Benny Loix Title: VP Treasury and M&A Email: [redacted: personal information]

And to:

Attention: Jair Amorim Rangel Title: EVP International Email: [redacted: personal information]

• (ii) in the case of the Company:

Avalon Advanced Materials Inc. Suite 1901 - 130 Adelaide Street West Toronto, Ontario M5H 3P5

Attention: Zeeshan Syed Title: President E-mail: [redacted: personal information]

and with a copy (which shall not constitute notice) to:

Cassels Brock & Blackwell LLP Suite 3200, Bay Adelaide Centre – North Tower 40 Temperance St. Toronto, ON M5H 0B4

Attention: Jay Goldman email: [redacted: personal information]

• (b) Any such notice or other communication shall be deemed to have been given and received on the day on which it was delivered or transmitted (or, if such day is not a Business Day or if delivery or transmission is made on a Business Day after 5:00 p.m. (Toronto time) at the place of receipt, then on the next following Business Day) or, if mailed, on the third Business Day following the date of mailing; provided, however, that if at the time of mailing or within three Business Days

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thereafter there is or occurs a labour dispute or other event which might reasonably be expected to disrupt the delivery of documents by mail, any notice or other communication hereunder shall be delivered or transmitted by means of recorded electronic communication as aforesaid.

• (c) Either party may at any time change its address for service from time to time by giving notice to the other party in accordance with this Section 8.3.

8.4 Amendments and Waivers

No amendment or waiver of any provision of this Agreement shall be binding on either party unless consented to in writing by such party. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided.

8.5 Assignment

No party may assign any of its rights or benefits under this Agreement, or delegate any of its duties or obligations, except with the prior written consent of the other party. Notwithstanding the foregoing, the Investor may assign and transfer all of its rights, benefits, duties and obligations under this Agreement in their entirety, without the consent of the Company, to an Affiliate of the Investor, provided that any such assignee shall, prior to any such transfer, agree to be bound by all of the covenants of the Investor contained herein and comply with the provisions of this Agreement, and shall deliver to the Company a duly executed undertaking to such effect in form and substance satisfactory to the Company, acting reasonably.

8.6 Successors and Assigns

This Agreement shall enure to the benefit of and shall be binding on and enforceable by and against the parties and their respective successors or heirs, executors, administrators and other legal personal representatives, and permitted assigns.

8.7 Expenses

Except as otherwise expressly provided in this Agreement, each party will pay for its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated herein, including the fees and expenses of legal counsel, financial advisors, accountants, consultants and other professional advisors.

8.8 Public Disclosure

The Company shall not issue any press release or publicly filed or disseminated document referencing, in any way, the Investor, unless: (i) the Company has obtained the Investor’s prior written consent to such disclosure, which consent shall not be unreasonably delayed or withheld; or (ii) the Company determines that such disclosure is required by Applicable Law. In addition, the Company shall provide the Investor with a reasonable opportunity to review and comment on each press release or publicly filed or disseminated document of the Company relating or

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referencing, in any way, the Investor, this Agreement or the transactions contemplated herein prior to the issuance thereof and incorporate any comments provided by the Investor, to the extent commercially reasonable. The parties further acknowledge and agree that once a party has initially approved the form, nature and extent of any disclosure, subsequent approval of the same disclosure for use in another continuous disclosure document will not be required for so long as the disclosure is not materially amended and the disclosure does not relate to the Investor, unless such disclosure has been approved by the Investor Nominee.

8.9 Further Assurances

Each of the parties shall, from time to time hereafter and upon any reasonable request of the other, promptly do, execute, deliver or cause to be done, executed and delivered all further acts, documents and things as may be required or necessary for the purposes of giving effect to this Agreement.

8.10 Right to Injunctive Relief

The parties agree that any breach of the terms of this Agreement by either party would result in immediate and irreparable injury and damage to the other party which could not be adequately compensated by damages. The parties therefore also agree that in the event of any such breach or any anticipated or threatened breach by the defaulting party, the other party shall be entitled to equitable relief, including by way of temporary or permanent injunction or specific performance, without having to prove damages, in addition to any other remedies (including damages) to which such other party may be entitled at law or in equity.

8.11 Counterparts

This Agreement and all documents contemplated by or delivered under or in connection with this Agreement may be executed and delivered in any number of counterparts, with the same effect as if each party had signed and delivered the same document, and all counterparts shall be construed together to be an original and will constitute one and the same agreement.

[Remainder of page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF this Agreement has been executed by the parties on the date first written above.

SCR-SIBELCO NV

By: “ Benny Loix ”

Name: Benny Loix

Title: VP Treasury and M&A

By: “ Ian Sedgman ”

Name: Ian Sedgman

Title: Chief Strategy and Business Development Officer

AVALON ADVANCED MATERIALS INC.

By: “ Scott Montieth ”

Name: Scott Monteith

Title: Chief Executive Officer

By: “ Zeeshan Syed ”

Name: Zeeshan Syed

Title: President

Signature Page - Investor Rights Agreement