OPERATING AGREEMENT

LLC Operating Agreement

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ASHDOWN PROJECT LLC | WIN-ELDRICH GOLD, INC. | GOLDEN PHOENIX MINERALS, INC.

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Title: OPERATING AGREEMENT
Governing Law: Nevada Date: 10/3/2006
Industry: Metal Mining Law Firm: Bullivant Houser Bailey PC;

ASHDOWN PROJECT LLC

OPERATING AGREEMENT

by and between

WIN-ELDRICH GOLD, INC.

and

GOLDEN PHOENIX MINERALS, INC.

SEPTEMBER 28, 2006

TABLE OF CONTENTS

Page

ARTICLE I

Definitions and Cross-references

1.1

Definitions

1.2

Cross References

ARTICLE II

NAME, PURPOSES, TERM AND OFFICES

2.1

Name

2.2

Purposes

2.3

Limitation

2.4

Term

2.5

Resident Agent; Offices

2.6

Powers

2.7

Principal Office

2.8

Officers

ARTICLE III

MEMBERS, OWNERSHIP INTERESTS AND THE TRANSFER OF OWNERSHIP INTERESTS

3.1

Initial Membership

3.2

Changes in Ownership Interests

3.3

Admission of New Members

3.4

Environmental Compliance

3.5

Relationship of the Members

3.6

Transfer of Interest and Preemptive Rights

3.7

Elimination of Minority Interest

3.8

Recalculation of Ownership Interests

3.9

Documentation of Adjustments to Ownership Interests

3.10

Continuing Liabilities

3.11

Waiver of Rights to Partition or Other Division of Assets

3.12

Bankruptcy of a Member

3.13

No Certificate

3.14

Implied Covenants

-i-

TABLE OF CONTENTS

(continued)

Page

ARTICLE IV

MANAGEMENT COMMITTEE AND MEETINGS

4.1

Organization and Composition

4.2

Decisions

4.3

Meetings

4.4

Matters Requiring Approval

4.5

Matters Requiring Unanimous Approval

ARTICLE V

MANAGER

5.1

Appointment

5.2

Powers and Duties of Manager

5.3

Standard of Care

5.4

Resignation; Deemed Offer to Resign

5.5

Payments to Manager

5.6

Transactions with Affiliates

5.7

Activities During Deadlock

ARTICLE VI

PROGRAMS AND BUDGETS

6.1

Operations Pursuant to Programs and Budgets

6.2

Initial Programs and Budgets

6.3

Quarterly Programs and Budgets

6.4

Presentation of Programs and Budgets

6.5

Review and Adoption of Proposed Programs and Budgets

6.6

Election to Participate

6.7

Recalculation or Restoration of Reduced Interest Based on Actual Expenditures

6.8

Expansion or Modification Programs and Budgets

6.9

Budget Overruns; Program Changes

6.10

Emergency or Unexpected Expenditures

6.11

References to the Manager

ARTICLE VII

Accounts and Settlements

7.1

Monthly Statements

7.2

Cash Calls

-ii-

TABLE OF CONTENTS

(continued)

Page

7.3

Failure to Meet Cash Calls

7.4

Cover Payment

7.5

Remedies

ARTICLE VIII

DISTRIBUTION OF NET CASH FLOW

8.1

Monthly Statements

8.2

Audits

8.3

Distributions of Net Cash Flow

ARTICLE IX

FISCAL YEAR AND ACCOUNTING PROCEDURES

9.1

Fiscal Year

9.2

Accounting Procedures

9.3

Charges to Business Account

9.4

Basis of Charges to Business Account

9.5

Inventories

ARTICLE X

FEDERAL TAX MATTERS

10.1

Federal Tax Elections and Allocations

10.2

State Income Tax

10.3

Tax Returns

ARTICLE XI

INSURANCE

11.1

Coverage

11.2

Increases

ARTICLE XII

CONFIDENTIALITY

12.1

Business Information

12.2

Member Information

12.3

Permitted Disclosure of Confidential Business Information

12.4

Disclosure Required By Law

12.5

Public Announcements

12.6

Canadian Disclosure Rules

ARTICLE XIII

DISPUTES

13.1

Governing Law

13.2

Dispute Resolution

-iii-

TABLE OF CONTENTS

(continued)

Page

ARTICLE XIV

RESIGNATION AND DISSOLUTION

14.1

Events of Dissolution

14.2

Resignation

14.3

Disposition of Assets on Dissolution

14.4

Filing of Certificate of Cancellation

14.5

Right to Data After Dissolution

14.6

Continuing Authority

ARTICLE XV

GENERAL PROVISIONS

15.1

Notices

15.2

Interpretation

15.3

Currency

15.4

Headings

15.5

Waiver

15.6

Modification

15.7

Force Majeure

15.8

Rule Against Perpetuities

15.9

Further Assurances

15.10

Entire Agreement; Successors and Assigns

15.11

Appointment of Initial Directors

15.12

Counterparts

15.13

Severability

15.14

Attorneys’ Fees

15.15

Creditors

-iv-

TABLE OF CONTENTS

EXHIBITS

Exhibit A

Definitions

Exhibit B

Win-Eldrich Contribution Agreement

Exhibit C

Golden Phoenix Contribution Agreement

Exhibit D

Underlying Agreements

Exhibit E

Federal Tax Matters

Exhibit F

Area of Interest Map

Exhibit G

The Properties

Exhibit H

Services Provided by GPM

Exhibit I

Net Profits Calculations

Exhibit J

Initial Program and Budget

Exhibit K

Net Returns

Schedule

Schedule of Members

-v-

ASHDOWN PROJECT LLC OPERATING AGREEMENT

This Ashdown Project LLC Operating Agreement is made by and between Win-Eldrich Gold, Inc., a Nevada corporation (“WEG”), and Golden Phoenix Minerals, Inc., a Minnesota corporation (“GPM”), effective as of the 28 ^th day of September, 2006 (the “Effective Date”).

Recitals

A. WEG and GPM have formed a limited liability company called the Ashdown Project LLC (the “Company”) pursuant to the Nevada Limited Liability Company Act under Chapter 86 of the Nevada Revised Statutes (the “Act”).

B. Pursuant to separate Contribution Agreements (collectively, the “Contribution Agreements”) of even date herewith between WEG and the Company (the “WEG Contribution Agreement”) and GPM and the Company (the “GPM Contribution Agreement”), respectively, WEG and GPM contributed certain interests in real and personal property and other assets to the Company in return for membership interests in the Company, all as described in the Contribution Agreements.

C. WEG and GPM, as the sole Members of the Company, now desire to enter into this Operating Agreement to govern the management of the Company and the future mineral exploration, evaluation, development and if warranted, mining operations by the Company on the Properties.

Agreement

Now therefore, in consideration of their mutual covenants and promises, WEG and GPM agree as follows:

ARTICLE I

DEFINITIONS AND CROSS-REFERENCES

1.1 Definitions. The capitalized terms defined in Exhibit A and elsewhere shall have the defined meaning wherever used in this Agreement, including in Exhibits.

1.2 Cross References. References to “Exhibits” and “Sections” refer to Exhibits and Sections of this Agreement.

ARTICLE II

NAME, PURPOSES, TERM AND OFFICES

2.1 Name. The name of the Company will be “Ashdown Project LLC.” The Manager shall accomplish any filings or registrations required by jurisdictions in which the Company conducts its Business.

2.2 Purposes. The Company has been formed under the Act for the following purposes and for no others, and this Agreement shall serve as the exclusive means by which all and each of the Members accomplishes such purposes:

2.2.1

To conduct Exploration within the Area of Interest;

2.2.2 To acquire additional real property and other interests within the Area of Interest;

2.2.3 To evaluate the possible Development and Mining of the Properties, and, if feasible, to engage in Development and Mining;

2.2.4

To engage in Operations on the Properties;

2.2.5

To engage in marketing Products on behalf of the Members;

2.2.6 To complete and satisfy all Environmental Compliance obligations and Continuing Obligations affecting the Properties; and

2.2.7 To perform any other activity necessary, appropriate, or incidental to any of the foregoing.

WEG and GPM agree that it is their intention that the Company will ultimately operate on a stand-alone, self-managing basis, managed initially by a Manager, but ultimately by the Members through the Management Committee, as set forth in Article IV and Sections 5.1 and 5.2.

2.3 Limitation. Unless the Members otherwise agree in writing, the Business of the Company shall be limited to the purposes described in Section 2.2, and nothing in this Agreement shall be construed to enlarge such purposes. The terms and provisions of this Agreement shall be construed to benefit and shall be enforceable by the Members and their respective successors and assigns only, and shall not be construed to create third party beneficiary rights in any other party or in any governmental organization or agency. Nothing contained in this Agreement shall be deemed a waiver or reduction of the limitations on the liabilities of the Members as provided by the Act and other applicable Law.

2.4 Term. The term of this Agreement shall begin on the Effective Date and shall continue for twenty-five (25) years from and after that date and so long thereafter as Products are produced from the Properties or other Operations are being conducted in good faith on a continuous basis, and thereafter until all materials, supplies, equipment and infrastructure pertaining to Operations have been salvaged and disposed of, and any required Environmental Compliance has been completed and accepted, unless the Agreement is earlier terminated in accordance with the terms and provisions hereof. Products shall be deemed to be produced from the Properties on a “continuous basis” so long as production in profitable quantities is not halted for more than twelve (12) consecutive full calendar months; Operations shall be deemed to be conducted on a “continuous basis” so long as they do not cease for more than twelve (12) consecutive full calendar months.

2.5 Resident Agent; Offices. The Manager shall select a duly qualified resident agent for the Company. The registered office of the Company in the State of Nevada shall be located at the Nevada office of GPM, unless and until the Management Committee chooses another address. The principal office of the Company shall be at any location which the Management Committee shall select.

2.6 Powers. The Company shall have all of the powers of a limited liability company set forth in the Act.

2.7 Principal Office. The principal office of the Company is initially 1675 E. Prater Way, Suite 102, Sparks, Nevada 89434, but the Company may maintain offices wherever the business of the Company may require.

2.8 Officers. The officers of the Company will be appointed by the Management Committee. The officers may include a Chief Executive Officer, President, Mine General Manager, and such other officers as the Management Committee may determine. Any person may hold two or more offices at the same time. The following persons who are Directors of the Company shall serve as the initial representatives of the Company who shall have the authority to execute documents on behalf of the Company (although any such document, to be effective, must be signed by one Director appointed by each Member), and to have the powers and duties as may be delegated from time to time by the Management Committee:

GPM Directors		WEG Directors

Dave Caldwell (Managing Director)		Perry Muller (Managing Director)
Ken Ripley		Pete Winn

ARTICLE III

MEMBERS, OWNERSHIP INTERESTS AND

THE TRANSFER OF OWNERSHIP INTERESTS

3.1 Initial Membership. There will be two Members with the following initial Ownership Interests:

3.1.1 Golden Phoenix Minerals, Inc. (“GPM”) – 60% Ownership Interest pursuant to the GPM Contribution Agreement attached hereto as Exhibit B.

3.1.2 Win-Eldrich Gold, Inc. (“WEG”) – 40% Ownership Interest pursuant to the WEG Contribution Agreement attached hereto as Exhibit C.

3.2 Changes in Ownership Interests. The Ownership Interests of the Members shall be eliminated or changed as follows:

3.2.1 Upon an election by either Member pursuant to Section 6.6.1 or Section 6.6.2 to contribute less to an adopted Program and Budget than the percentage equal to its Ownership Interest, or to contribute nothing to an adopted Program and Budget;

3.2.2 In the event of default by either Member in making its agreed-upon contribution to an adopted Program and Budget, followed by an election by the other Member to invoke any of the remedies in Article VII;

3.2.3 Upon voluntary Transfer by either Member of part or all of its Ownership Interest; or

3.2.4 Upon acquisition by either Member of part or all of the Ownership Interest of the other Member, however arising.

3.3 Admission of New Members. Except in the event of a permitted Transfer, a new member may be admitted only with the unanimous written approval of the Members.

3.4 Environmental Compliance. The Company shall be responsible for complying with all Laws relating to all reclamation and other Environmental Compliance obligations existing on the Properties and all Continuing Obligations, including, without limitation, any obligation to reclaim all such disturbances as required by and in accordance with applicable Laws, and all applicable permit and closure requirements relating to such disturbances, and assumes from the Members all such obligations (other than (a) any such obligations and related liabilities which had accrued and were required to have been performed prior to the Effective Date and (b) any such obligations and related liabilities which arise from a breach by either of the Members of any of their respective representations, warranties or covenants set forth in this Agreement or the Contribution Agreements) existing as of the Effective Date.

3.5

Relationship of the Members.

3.5.1 Limitation on Authority of Members. The liability of each Member shall be limited as provided by the Act. The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that neither Member be a partner or joint venturer of the other Member, other than as set forth in Article X, and this Agreement may not be construed to suggest otherwise. No Member is an agent of the Company or the other Member solely by virtue of being a Member, and no Member has authority to act for the Company or the other Member solely by virtue of being a Member. Each Member has the authority to act on behalf of the Company only to the extent expressly authorized to do so under this Agreement. This Section 3.5.1 supersedes any authority granted to the Members pursuant to the Act. Any Member that takes any action or binds the Company in violation of this Section 3.5.1 shall be solely responsible for any loss and expense incurred by the Company as a result of the unauthorized action and shall defend, indemnify and hold the Company and the other Member harmless with respect to such loss or expense. The Members expressly agree that there is no fiduciary relationship between them pursuant to this Agreement.

3.5.2

Indemnities.

(a) By the Company. The Company shall defend, indemnify and hold harmless each Member and the Manager from and against any Material Loss (as defined in Section 3.5.2(c), below), whatsoever arising from or related to the Business or a Member’s membership in the Company, or any act or omission of either Member or the Manager believed in good faith to be within the scope of authority conferred by this Agreement, so long as such

Material Loss does not arise from a breach of that Member’s representations and warranties set forth in the Contribution Agreements attached as Exhibits B and C, or the breach of or failure to perform by that Member any of its covenants or obligations under those Contribution Agreements or in this Agreement, or the gross negligence or willful misconduct of that Member. Without limiting the foregoing in any manner, the Company shall defend, indemnify and hold GPM harmless from and against any Material Loss arising from or based on (i) any draw made by any governmental agency or other beneficiary under any reclamation bond or other surety pertaining to Operations or other activities on the Properties and currently held in GPM’s name (a “GPM Bond”), or (ii) any judicial arbitration or governmental proceeding arising out of or relating to any GPM Bond, with the understanding that GPM will transfer any and all GPM Bonds to the Company as soon as feasible. The Company shall also have the authority to indemnify the Directors as reasonably deemed necessary by the Management Committee.

(b) By the Members. Each Member shall defend, indemnify and hold the other Member, its directors, officers, employees, agents and attorneys, and Affiliates (collectively, the “Indemnified Party”) harmless from and against the entire amount of any Material Loss arising from or based on a breach or failure to perform by a Member (the “Indemnifying Party”) of any representation, warranty or covenant contained in this Agreement, including without limitation:

(i) any action taken for or obligation or responsibility assumed on behalf of the Company or another Member by a Member or any of its directors, officers, employees, agents and attorneys, or Affiliates, in violation of this Agreement;

(ii) failure of a Member or its Affiliates to comply with the Area of Interest provisions of Section 3.5.4, below;

(iii) any Transfer that causes termination of the tax partnership established under this Agreement, against which the transferring Member shall indemnify the non-transferring Member as provided in this Section 3.5.2 and Exhibit E; and

(iv) failure of a Member or its Affiliates to comply with the preemptive rights provisions of Section 3.6.3.

(c) Threshold. A Material Loss shall mean all direct and indirect costs, expenses, damages or liabilities incurred by the Indemnified Party, including reasonable attorneys’ fees and other costs of threatened or pending litigation, and shall be deemed to have occurred upon a breach of or failure to perform any covenant in this Agreement, but shall not be deemed to have occurred following breaches of warranties and representations contained in the Contribution Agreements attached as Exhibits B and C until an Indemnified Party incurs losses, costs, damages or liabilities in excess of Ten Thousand Dollars ($10,000.00), in the aggregate, relating to such breaches.

(d) Claim Procedure. If either Member believes it has suffered a Material Loss for which the other Member or the Company is obligated to indemnify it under this Section 3.5.2 or otherwise under this Agreement, or if any claim or demand is asserted by a third party against an Indemnified Party in respect of which such Indemnified Party may be

entitled to indemnification under this Agreement, written notice of such belief, claim or demand shall promptly be given to the Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party’s failure to provide prompt notice shall not be deemed to relieve the Indemnifying Party from any of its indemnification obligations under this Agreement unless the Indemnifying Party is materially prejudiced thereby. With respect to any third party claim or demand, the Indemnifying Party shall have the right, but not the obligation, by notifying the Indemnified Party within thirty (30) days after its receipt of the notice from the Indemnified Party, to assume the entire control of (subject to the right of the Indemnified Party to participate, at the Indemnified Party’s expense and with counsel of the Indemnified Party’s choice), the defense, compromise, or settlement of the matter, including, at the Indemnifying Party’s expense, employment of counsel of the Indemnifying Party’s choice. Until the Indemnifying Party has agreed to defend any third party claim or demand, the Indemnified Party may file any notice, answer or other pleading or take such other actions as are reasonably appropriate to protect its interests, those of the Company, the Assets or the Business, or those of the Indemnifying Party. Any damages to the assets or business of the Indemnified Party or the Company caused by a failure by the Indemnifying Party to defend, compromise, or settle a claim or demand in a reasonable and expeditious manner requested by the Indemnified Party, after the Indemnifying Party has given notice that it will assume control of the defense, compromise, or settlement of the matter, shall be included in the damages for which the Indemnifying Party shall be obligated to indemnify the Indemnified Party. Any settlement or compromise of a matter by the Indemnifying Party shall include a full release of claims against the Indemnified Party which have arisen from the indemnified claim or demand, and may not include the payment or provision of any consideration by or any restriction whatsoever on the Indemnified Party (other than a reciprocal release by the Indemnified Party), or else may not be made without the express prior written consent of the Indemnified Party, which may not be unreasonably withheld or delayed.

3.5.3 Liability and Limitations. Neither Member nor the Company shall be liable to the other Member or the Company for any consequential, punitive, special, or indirect damages, including but not limited to, loss of profit. Neither of the Members in their capacity as Members or Manager shall be bound by, or liable for, any debt, liability or obligation of the Company, whether arising in contract, tort, or otherwise, except as expressly provided by this Agreement. Except as otherwise provided in this Agreement, the Members shall be under no obligation to restore a deficit Capital Account upon the dissolution of the Company or the liquidation of any of their Ownership Interests.

3.5.4

Acquisitions in the Area of Interest.

(a) Until it is dissolved, only the Company, and not either of the Members individually, can acquire lands and interests in lands or water rights or locate mining claims or millsites within the Area of Interest. If a Member or any Affiliate breaches this Section 3.5.4(a), such Member shall be obligated to deliver to the Company, without cost, any property interest so acquired (or ensure its Affiliate offers to convey the property interest to the Company, if the acquiring party is the acquiring Member’s Affiliate). Such offer shall be made in writing and can be accepted by the other Member (on behalf of the Company) at any time within ten (10) days after the offer is received by the other Member. Neither Member shall structure any arrangement for the acquisition of any interests in real property or water rights

within the AOI with the intention of avoiding or undermining the provisions of this Section 3.5.4(a).

(b) Neither a Member that resigns pursuant to this Agreement, or is deemed to have resigned pursuant to this Agreement, nor any Affiliate of such a Member, shall directly or indirectly acquire any interest or right to explore, develop or mine, or both, on any property any part of which is within the AOI for two (2) years after the effective date of resignation. If a resigning Member, or the Affiliate of a resigning Member, breaches this Section 3.5.4(b), such Member shall be obligated to offer to convey to the non-resigning Member (or the Company if it has not been dissolved), without cost, any such property or interest so acquired (or ensure its Affiliate offers to convey the property or interest to the non-resigning Member or the Company, if the acquiring party is the resigning Member’s Affiliate). Such offer shall be made in writing and can be accepted by the non-resigning Member or Company at any time within ten (10) days after the offer is received by such non-resigning Member. Failure of a Member’s Affiliate to comply with this Section shall be a breach by such Member of this Agreement.

3.5.5

Other Business Opportunities.

(a) Each Member shall have the right to engage in and receive full benefits from any independent business activities or operations, whether or not competitive with the Company or the Business, without consulting with, or obligation to, the other Member or the Company. The doctrines of “corporate opportunity” or “business opportunity” shall not be applied to the Business nor to any other activity or operation of any Member.

(b) No Member shall have any obligation to the Company or any other Member with respect to any opportunity to acquire any property outside the Area of Interest at any time, or within the Area of Interest after the dissolution of the Company or the termination of this Agreement regardless of whether the incentive or opportunity of a Member to acquire any such interest may be based, in whole or in part, upon information learned (i) during the course of or as a result of the conduct of Operations or (ii) in connection with the Properties during the term of this Agreement, except as limited under Section 3.5.4 above.

(c) No Member shall have any obligation to mill, beneficiate or otherwise treat any Products in any facility owned or controlled by such Member, with the understanding that the Ashdown Mill is owned and controlled by the Company pursuant to the GPM Contribution Agreement and not by any Member.

3.6

Transfer of Interest and Preemptive Rights.

3.6.1 General . A Member shall have the right to Transfer to a third party its Ownership Interest, or any beneficial interest therein, solely as provided in this Section 3.6.

3.6.2 Limitations on Free Transferability. Any Transfer by either Member shall be subject to the following limitations:

(a) Neither Member shall Transfer any beneficial interest in the Company (including, but not limited to, any royalty, profits, or other interest in the Products) except in conjunction with the Transfer of part or all of its Ownership Interest;

(b) No transferee of all or any part of a Member’s Ownership Interest shall have the rights of a Member unless and until the transferring Member has provided to the other Member notice of the Transfer, the other Member has consented in writing to the Transfer (such consent not to be unreasonably withheld or delayed), and, except as provided in Sections 3.6.2(f) and (g), the transferee, as of the effective date of the Transfer, has committed in writing to assume and be bound by this Agreement to the same extent as the transferring Member;

(c) Neither Member, without the consent of the other Member, shall make a Transfer that shall violate any Law, or result in the cancellation, suspension or revocation of any permits, licenses, or other similar authorization;

(d) No Transfer shall relieve the transferring Member of any liability of such transferring Member under this Agreement, whether accruing before or after such Transfer, unless the other Member consents to such Transfer in writing;

(e) Any Member that makes a Transfer that shall cause termination for federal income tax purposes of the tax partnership established by this Agreement shall defend, indemnify and hold the other Member harmless for, from and against any and all loss, cost, expense, damage, liability or claim therefore arising from the Transfer, including without limitation any increase in taxes, interest and penalties or decrease in credits caused by such termination and any tax on indemnification proceeds received by the indemnified Member;

(f) In the event of a Transfer of less than all of an Ownership Interest, the transferring Member and its transferee shall act and be treated as one Member under this Agreement; provided however, that in order for such Transfer to be effective, the transferring Member and its transferee must first:

(i) Agree, as between themselves, that one of them is authorized to act as the sole agent (“Agent”) on their behalf with respect to all matters pertaining to this Agreement and the Company; and

(ii) Notify the other Member of the designation of the Agent, and in such notice warrant and represent to the other Member that:

(1) the Agent has the sole authority to act on behalf of, and to bind, the transferring Member and its transferee with respect to all matters pertaining to this Agreement and the Company;

(2) the other Member may rely on all decisions of, notices and other communications from, and failures to respond by, the Agent, as if given (or not given) by the transferring Member and its transferee; and

(3) all decisions of, notices and other communications from, and failures to respond by, the other Member to the Agent shall be deemed to have been given (or not given) to the transferring Member and its transferee.

The transferring Member and its transferee may change the Agent (but such replacement must be one of them) by giving notice to the other Member.

(g) If the Transfer is the grant of an Encumbrance on an Ownership Interest to secure a loan or other indebtedness of either Member in a bona fide transaction, other than a transaction approved unanimously by the Management Committee or Project Financing approved by the Management Committee, such Encumbrance shall be granted only in connection with such Member’s financing payment or performance of that Member’s obligations under this Agreement and shall be subject to the terms of this Agreement and the rights and interests of the other Member hereunder. Any such Encumbrance shall be further subject to the condition that the holder of such Encumbrance (the “Chargee”) first enters into a written agreement with the other Member in form satisfactory to the other Member, acting reasonably, binding upon the Chargee, to the effect that:

(i) The Chargee shall not enter into possession or institute any proceedings for foreclosure or partition of the encumbering Member’s Ownership Interest and that such Encumbrance shall be subject to the provisions of this Agreement;

(ii) The Chargee’s remedies under the Encumbrance shall be limited to the sale of the whole (but only of the whole) of the encumbering Member’s Ownership Interest to the other Member, or, failing such a sale, at a public auction to be held at least thirty (30) days after prior notice to the other Member, such sale to be subject to the purchaser entering into a written agreement with the other Member whereby such purchaser assumes all obligations of the encumbering Member under the terms of this Agreement. The price of any preemptive sale to the other Member shall be the remaining principal amount of the loan plus accrued interest and related expenses, and such preemptive sale shall occur within sixty (60) days after the Chargee’s notice to the other Member of its intent to sell the encumbering Member’s Ownership Interest. Failure of a sale to the other Member to close by the end of such period, unless failure is caused by the encumbering Member or by the Chargee, shall permit the Chargee to sell the encumbering Member’s Ownership Interest at a public sale; and

(iii) The Encumbrance shall be subordinate to any then-existing debt, including Project Financing previously approved by the Management Committee, encumbering the transferring Member’s Ownership Interest.

(h) If a sale or other commitment or disposition of Products or proceeds from the sale of Products by a Member upon distribution to it creates in a third party a security interest in Products or proceeds therefrom prior to such distribution, such sales, commitment or disposition shall be subject to the terms and conditions of this Agreement.

(i) Only United States currency shall be used for Transfers for cash consideration or monetary equivalent.

3.6.3 Preemptive Rights. If a Member intends to Transfer all or any part of its Ownership Interest, or an Affiliate of a Member intends to Transfer Control of such Member (“Transferring Entity”), such Member shall promptly notify the other Member of such intentions. The notice shall state the price and all other pertinent terms and conditions of the intended Transfer, and shall be accompanied by a copy of the offer or the contract for sale. If the consideration for the intended transfer is, in whole or in part, other than monetary, the notice shall describe such consideration and its monetary equivalent (based upon the fair market value of the nonmonetary consideration and stated in terms of cash or currency). The other Member shall have sixty (60) days from the date such notice is delivered to notify the Transferring Entity (and the Member if its Affiliate is the Transferring Entity) whether it elects to acquire the offered interest at the same price (or its monetary equivalent in cash or currency) and on the same terms and conditions as stated in the notice. If the non-Transferring Entity Member elects to acquire the offered interest, its acquisition of the offered interest shall be consummated promptly.

(a) If the non-Transferring Entity Member fails to so elect within the period provided for above, the Transferring Entity shall have ninety (90) days following the expiration of such period to consummate the Transfer to a third party at a price and on terms no less favorable to the Transferring Entity than those offered by the Transferring Entity to the non-Transferring Entity Member in the aforementioned notice.

(b) If the Transferring Entity fails to consummate the Transfer to a third party within the period stated above, the preemptive right of the non-Transferring Entity Member and the correlative obligation of the Transferring Entity in respect of such offered interest shall be deemed to be revived. Any subsequent proposal to Transfer such interest shall be conducted in accordance with all of the procedures stated in this Section.

(c) If a Member’s Affiliate intends to Transfer Control of that Member, the Members acknowledge that the preemptive right provided for herein shall apply only to the Transferring Entity’s Ownership Interest and not to ownership or control of the Transferring Entity itself. In such an event, the Ownership Interest of the Transferring Entity shall be offered to the other Member at its then current fair market value. The Transferring Entity shall provide its determination as to the fair market value of its Ownership Interest in the notice to the other Member(s) referred to in this Section 3.6.3. If the other Member disagrees with the Transferring Entity’s calculation of the fair market value of its Ownership Interest, then the fair market value will be determined by a qualified independent appraiser designated by the other Member. If the Transferring Entity conveys notice of objection to the person so appointed within five (5) days after receiving notice thereof, then an independent and qualified appraiser shall be appointed by the joint action of the appraiser appointed by the other Member and a qualified independent appraiser appointed by the Transferring Entity; provided, however, that if the Transferring Entity fails to designate a qualified independent appraiser for such purpose within five (5) days after giving notice of such objection, then the person originally designated by the other Member shall serve as the appraiser. The appraiser shall make a determination as to the fair market value of the Transferring Entity’s Ownership Interest not later than thirty (30)

days after the effective date of his or her appointment. The fees and expenses of the appraiser shall be split equally between the Members.

3.6.4 Exceptions to Preemptive Right. Section 3.6.3 above shall not apply to the following:

(a) Transfer by a Member of all or any part of its Ownership Interest to an Affiliate, except that this exception will no longer apply and the preemptive right set forth above will be triggered in the event that the Affiliate to whom a Member Transfers its Ownership Interest ceases being an Affiliate of the Transferring Entity;

(b) Incorporation of a Member, or corporate consolidation or reorganization of a Member by which the surviving entity shall possess substantially all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of that Member;

(c) Corporate merger or amalgamation involving a Member by which the surviving entity or amalgamated company shall possess all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of that Member; provided, however, that the value of the merging or amalgamating Member’s interest in the Company, evidenced by its Capital Account balance (as described in Exhibit E), does not exceed fifty percent (50 %) of the Net Worth of the surviving entity or amalgamated company (not including the value of that interest in the Company);

(d) The transfer of Control of a Member by an Affiliate to such Member or to another Affiliate;

(e) Subject to Section 3.6.2(g), the grant by a Member of a security interest in its Ownership Interest by Encumbrance;

(f) The creation by any Affiliate of a Member of an Encumbrance affecting its Control of such Member; or

(g) Unintentional change of Control of Members which are publicly held companies.

3.7 Elimination of Minority Interest. A Member whose Recalculated Ownership Interest becomes less than ten percent (10%) (a “Reduced Member”) shall be deemed to have withdrawn from the Company and shall relinquish its entire Ownership Interest free and clear of any Encumbrances arising by, through or under the Reduced Member, except any such Encumbrances listed in Exhibit G or to which the Members have agreed in writing. Such relinquished Ownership Interest shall be deemed to have accrued automatically to the other Member. The Reduced Member’s Capital Account shall be automatically transferred to the remaining Member. The Reduced Member shall have no further right, title, or interest in the Assets or in the Company, and the tax partnership established in Article X shall dissolve pursuant to Article XIV and Exhibit E if only one Member remains. In addition, upon such relinquishment (unless it is the result of failure to contribute to an approved Program and Budget for Expansion or Modification of Operations, in which case the provisions of Section 7.5.2(b)

shall apply), the Company shall convey to the Reduced Member, by way of a royalty deed in form and substance mutually agreeable to the parties, a production royalty of three percent (3%) of the Net Returns derived from Products produced and sold from the Properties.

3.8 Recalculation of Ownership Interests. The relinquishment and resignation for which Section 3.7 provides shall be effective as of the effective date of the recalculation under Sections 6.6 or 7.5.2. However, if the final adjustment provided under Section 6.7 for any recalculation under Section 6.6 results in a Recalculated Ownership Interest of ten percent (10%) or more: (a) the Recalculated Ownership Interest shall be deemed, effective retroactively as of the first day of the Program Period, to have automatically revested; (b) the Reduced Member shall be reinstated as a Member, with all of a Member’s rights and obligations; and (c) the Manager or Management Committee, on behalf of the Members, or the Company, shall make any necessary reimbursements, reallocations of Products, contributions and other adjustments as provided in Section 6.7.4. Similarly, if such final adjustment under Section 6.7 results in a Recalculated Ownership Interest for either Member of less than ten percent (10%) for a Program Period as to which the provisional calculation under Section 6.6 had not resulted in an Ownership Interest of less than ten percent (10%), then such Member, at its election within thirty (30) days after notice of the final adjustment, may contribute an amount resulting in a revised final adjustment and resultant Recalculated Ownership Interest of ten percent (10%). If no such election is made, such Member shall be deemed to have withdrawn under the terms of Section 3.7 as of the beginning of such Program Period, and the Manager or Management Committee, on behalf of the Members, or the Company, shall make any necessary reimbursements, reallocations of Products, contributions and other adjustments as provided in Section 6.7.4.

3.9 Documentation of Adjustments to Ownership Interests. Each Member’s Ownership Interest and related Equity Account balance shall be shown in the accounting records of the Company, and any adjustments, including any reduction, readjustment, and restoration of Ownership Interests under Sections 3.7, 6.6, 6.7 and 7.5.2, shall be made monthly. The Company’s register of Members shall be amended from time to time to reflect such changes.

3.10 Continuing Liabilities. Any reduction or elimination of a Member’s Ownership Interest shall not relieve such Member of its share of any liability, including, without limitation, Continuing Obligations, Environmental Liabilities and Environmental Compliance, whether arising before or after such reduction or elimination, from Operations conducted beginning February 5, 2004 and continuing throughout the term of this Agreement, regardless of when any funds may be expended to satisfy such liability. For purposes of this Section 3.10, such Member’s share of such liability shall be equal to its Ownership Interest at the time the act or omission giving rise to the liability occurred, after first taking into account any prior reduction, readjustment or restoration of Ownership Interests under this Agreement (or, as to such liability arising from acts or omissions occurring or conditions existing before the Effective Date, equal to such Member’s initial Ownership Interest). Should the cumulative cost of satisfying Continuing Obligations exceed the cumulative amounts accrued or otherwise charged to the Environmental Compliance Fund, and should any Member be found personally liable therefor, each of the Members shall make a capital contribution to the Company for its proportionate share (that is, its Ownership Interest in the Company at the time of the act or omission giving rise to such liability occurred), after first taking into account any reduction, readjustment and restoration

of Ownership Interests, of the cost of satisfying such Continuing Obligations, notwithstanding that a Member has previously resigned from the Company. On dissolution of the Company, each Member shall remain liable for its respective share of liabilities to third parties (whether such arises before or after such dissolution), including Environmental Liabilities and Continuing Obligations. In the event of the resignation of a Member, the resigning Member’s share of such liabilities shall be equal to its Ownership Interest at the time such liability was incurred, after first taking into account any reduction, readjustment and restoration of Ownership Interests under this Agreement (or, as to liabilities arising before the Effective Date, its initial Ownership Interest). The foregoing provisions are solely for the benefit of the Members and are not intended to benefit any third party.

3.11 Waiver of Rights to Partition or Other Division of Assets. The Members waive and release all rights of partition, or of sale in lieu thereof, or other division of Assets, including any such rights provided by Law.

3.12 Bankruptcy of a Member. A Member shall cease to have any power as a Member or Manager or any voting rights on the Management Committee or rights of approval hereunder upon voluntary or involuntary bankruptcy, insolvency, dissolution or assignment for the benefit of creditors of such Member, and its successor upon the occurrence of any such event shall have only the rights, powers and privileges of a transferee enumerated in Section 3.6.2, and shall be liable for all obligations of the Member under this Agreement. In no event, however, shall a personal representative or successor become a substitute Member unless the requirements of Sections 3.6.2 and 3.6.3 are satisfied.

3.13 No Certificate. The Company shall not issue certificates representing Ownership Interests in the Company.

3.14 Implied Covenants. There are no implied covenants contained in this Agreement other than those of good faith and fair dealing.

ARTICLE IV

MANAGEMENT COMMITTEE AND MEETINGS

4.1 Organization and Composition. The Members hereby establish a Management Committee which shall determine overall policies, objectives, procedures, methods and actions of the Company under this Agreement, except as otherwise expressly set forth in this Agreement. The Management Committee shall constitute the Company’s board of directors. The Management Committee shall consist of two (2) Directors appointed by WEG and three (3) Directors appointed initially by GPM. The Management Committee shall be reconstituted as necessary whenever Ownership Interests are recalculated under this Agreement, so that the Management Committee always consists of three (3) directors appointed by the Member with the greater Ownership Interest (the “Majority Member”). One of the Directors appointed by GPM (or subsequently, by the Majority Member) shall be an individual experienced in the mining business and in the operation of a mine who is not a current officer, director or employee of either Member, or a direct relative of the officers, directors or employees of either Member, and the appointing Member will make good faith efforts to appoint a qualified person to this post.

His or her appointment or replacement shall require the consent of the other Member, such consent not to be unreasonably withheld or delayed, and the other Member shall also have the right to request that he or she be replaced. All Directors shall represent the Company and its best interests and not the specific interest of any Member. Each Member may appoint one or more alternates to act in the absence of a regular Director. Any alternate so acting shall be deemed a Director. Appointments of Directors by a Member shall be made or changed by notice to the other Member. The Member with the right to appoint three (3) directors shall designate one of its Directors to serve as the chair of the Management Committee, although the designation of that Director as chair of the Management Committee shall in no way alter the decision-making process set forth in Section 4.2. The chair of the Management Committee shall not by virtue of that designation have a second or a tie-breaking vote.

4.2 Decisions. Each Director in attendance at a meeting shall have a vote on the Management Committee. The vote of the majority of the Directors of the Management Committee shall control except with respect to the specific items listed in Section 4.5.

4.3

Meetings.

4.3.1 Schedule of Meetings. With respect to Operations pertaining to Development, Mining and the production of Products through the end of 2006, the Management Committee shall meet in Reno, Nevada, during each month to vote on the Program and Budget for such Operations for the upcoming calendar month, as set forth in Section 6.2. Thereafter, the Management Committee shall hold regular meetings at least quarterly in Reno, Nevada, or at other agreed places, approximately fifteen days before the end of the calendar quarter. The chair of the Management Committee shall give thirty (30) days notice to the Members and the Directors of such meetings. Additionally, either Member may call a special meeting upon seven (7) days notice to the other Member. In case of an emergency, reasonable notice of a special meeting shall suffice. There shall be a quorum if at least one Director representing each Member is present; provided, however, that if a Member fails to attend two consecutive properly called meetings, then a quorum shall exist at the second meeting if the other Member is represented by at least one appointed Director, and a vote of such Director shall be considered the vote required for the purposes of the conduct of all business properly noticed even if such vote would otherwise require unanimity. If business cannot be conducted at a regular or special meeting due to the lack of a quorum, either Member may call the next meeting upon five (5) business days notice to the other Member.

4.3.2 Minutes of Meetings. Each notice of a meeting shall include an itemized agenda prepared by the chair of the Management Committee in the case of a regular meeting or by the Member calling the meeting in the case of a special meeting, but any matters may be considered if either Member adds the matter to the agenda at least five (5) business days before the meeting or with the consent of the other Member. The chair of the Management Committee shall prepare minutes of all meetings and shall distribute copies of such minutes to the other within five (5) business days after the meeting. Either Member may electronically record the proceedings of a meeting with the consent of the other Member. The other Member shall sign and return or object to the minutes prepared by the chair of the Management Committee within five (5) business days after receipt, and failure to do either shall be deemed acceptance of the minutes as prepared by the chair of the Management Committee. The minutes, when signed or

deemed accepted by both Members, shall be the official record of the decisions made by the Management Committee. Decisions made at a Management Committee meeting shall be implemented in accordance with adopted Programs and Budgets. If a Member timely objects to minutes proposed by the chair of the Management Committee, the members of the Management Committee shall seek, for a period not to exceed thirty (30) days from receipt by the chair of the Management Committee of notice of the objections, to agree upon minutes acceptable to both Members. If the Management Committee does not reach agreement on the minutes of the meeting within such thirty (30) day period, the minutes of the meeting as prepared by the chair of the Management Committee together with the other Member’s proposed changes shall collectively constitute the record of the meeting. If personnel employed in Operations are required to attend a Management Committee meeting, reasonable costs incurred in connection with such attendance shall be charged to the Business Account. All other costs shall be paid by the Members individually.

4.3.3 Action Without Meeting in Person. In lieu of meetings in person, at the request of either Member, the Management Committee may conduct meetings by telephone or video conference, so long as minutes of such meetings are prepared in accordance with the section above. The Management Committee may also, in lieu of meetings, take actions in writing signed by all the Directors of the Management Committee.

4.4 Matters Requiring Approval. Except as otherwise provided in this Agreement, the Management Committee shall have exclusive authority to determine all matters related to overall policies, objectives, procedures, methods and actions of the Company under this Agreement.

4.5 Matters Requiring Unanimous Approval. The following require unanimous written approval of the Management Committee:

4.5.1

Any amendments to this Agreement.

4.5.2 Sale of Properties or Capital Expenditures in excess of $100,000.00 per calendar quarter.

4.5.3 Incurring debts in excess of $100,000.00 per calendar quarter or granting of any security interests in the Assets, other than as specifically provided for in this Agreement.

4.5.4 Filing lawsuits in the name of the Company against third parties, except where the Manager or the Mine General Manager reasonably believes that emergency action (such as the filing of a request for a temporary restraining order or a preliminary injunction) is necessary.

4.5.5 Expanding the rate of Production of Products by an amount costing more than 75% of the Net Cash Flow of the Company during any period of time, which period also requires unanimous agreement.

4.5.6 Acquisition of Assets in excess of $100,000.00 per calendar quarter, other than as specifically provided for in this Agreement.

4.5.7 Payment of consulting fees to any third party other than one of the Members in excess of $25,000 per calendar quarter (on an aggregate basis).

4.5.8 Distributions to the Members, except to the extent specifically provided for in Article VIII.

4.5.9

Any amendments to the GPM or WEG Contribution Agreements.

4.5.10

Any amendments to the Underlying Agreements.

4.5.11

The addition of a new Member.

4.5.12 Any non-arm’s-length agreement or transaction involving expenditures by the Company in excess of $100,000.

4.5.13 Any agreements the Company enters into for the sale of Products, including derivative agreements.

4.5.14

Any Project Financing.

ARTICLE V

MANAGER

5.1 Appointment. The Members hereby appoint GPM as the initial Manager of the Company with overall management responsibility for Operations. GPM will serve as the Manager at the discretion of the Management Committee following the Effective Date. Within 180 days after the Effective Date, the Management Committee will make a decision as to whether it is necessary to retain GPM as the Manager for any additional period of time, or whether the Company should be managed going forward by the Management Committee, with the Mine General Manager and the other officers of the Company being responsible for the day-to-day operations of the Company. When the Management Committee makes that decision (the “Stand-Alone Date”), the Company’s Articles of Organization shall promptly be amended as required.

5.2 Powers and Duties of Manager. Subject to the terms and provisions of this Agreement, and subject to the Company having adequate funding in place to perform all Operations agreed to in adopted Programs and Budgets, the Manager shall have the following powers and duties, which, from and after the Effective Date, shall be discharged in accordance with adopted Programs and Budgets. From and after the Stand-Alone Date, the following powers and duties shall be vested in and the responsibility of the Management Committee, to be carried out by the Mine General Manager on behalf of the Management Committee, except where such powers are specifically identified in the remainder of this Section 5.2 as being vested in or the responsibility of the Majority Member or the Company (as directed by the Management Committee).

5.2.1 The Manager shall manage, direct and control Operations, and shall prepare and present to the Management Committee proposed Programs and Budgets as provided in Article VI.

5.2.2 The Manager shall implement the decisions of the Management Committee, shall cause the Company to make all expenditures necessary to carry out adopted Programs, and shall promptly advise the Management Committee if it lacks sufficient funds to carry out its responsibilities under this Agreement.

5.2.3 The Manager shall use reasonable efforts to: (a) purchase or otherwise acquire all material, supplies, equipment, water, utility and transportation services required for Operations (to the extent the same are available using commercially reasonable efforts), such purchases and acquisitions to be made to the extent reasonably possible on the best terms available, taking into account all of the circumstances; (b) obtain such customary warranties and guarantees as are available in connection with such purchases and acquisitions; and (c) keep the Assets free and clear of all Encumbrances, except any such Encumbrances listed in Exhibit G and those existing at the time of, or created concurrent with, the acquisition of such Assets, or mechanic’s or materialmen’s liens (which shall be contested, released or discharged in a diligent matter) or Encumbrances specifically approved by the Management Committee.

5.2.4 The Manager or, following the Stand-Alone Date, the Company, shall conduct such title examinations of the Properties and cure such title defects pertaining to the Properties as may be advisable in its reasonable judgment.

5.2.5 The Manager shall: (a) make or arrange for all payments required by leases, licenses, permits, contracts and other agreements related to the Assets; (b) pay all taxes, assessments and like charges on Operations and Assets except taxes determined or measured by a Member’s sales revenue or net income and taxes, including production taxes, attributable to a Member’s share of Products, and shall otherwise promptly pay and discharge expenses incurred in Operations; provided, however, that if authorized by the Management Committee, the Manager shall have the right to contest (in the courts or otherwise) the validity or amount of any taxes, assessments or charges if the Manager deems them to be unlawful, unjust, unequal or excessive, or to undertake such other steps or proceedings as the Manager may deem reasonably necessary to secure a cancellation, reduction, readjustment or equalization thereof before the Manager shall be required to pay them, but in no event shall the Manager permit or allow title to the Assets to be lost as the result of the nonpayment of any taxes, assessments or like charges; and (c) do all other acts reasonably necessary to maintain the Assets.

5.2.6 The Manager shall: (a) apply for all necessary permits, licenses and approvals; (b) comply with all Laws; (c) promptly notify the Management Committee of any allegations of substantial violation thereof; and (d) prepare and file all reports or notices required for or as a result of Operations. The Manager shall not be in breach of this provision if a violation has occurred in spite of the Manager’s good faith efforts to comply consistent with its standard of care under Section 5.3. In the event of any such violation, the Company shall timely cure or dispose of such violation through performance, payment of fines and penalties, or both, and the cost thereof shall be charged to the Business Account. With respect to the posting of any bonds or other surety required to obtain any permits, licenses or approvals, neither Member shall

have any obligation to provide corporate guarantees or make its balance sheet or other property owned by it available to ensure that such bonds or other surety are in place.

5.2.7 The Company shall prosecute and defend, but shall not initiate without consent of the Management Committee, all litigation or administrative proceedings arising out of Operations. Each Member shall have the right to participate, at its own expense, in such litigation or administrative proceedings. The Management Committee shall approve in advance the commencement of any litigation or any settlement involving payments, commitments or obligations in excess of Fifty Thousand Dollars ($50,000.00) in cash or value.

5.2.8 The Manager shall obtain insurance in the name and for the benefit of the Company as provided in Article XI or as may otherwise be determined from time to time by the Management Committee.

5.2.9 The Company may dispose of Assets, whether by abandonment, surrender, or Transfer in the ordinary course of business, except that Properties may be abandoned or surrendered only with the approval of the Management Committee. Without prior authorization from the Management Committee, however, the Company shall not dispose of Assets in any one transaction (or in any series of related transactions) having a value in excess of Fifty Thousand Dollars ($50,000.00). The Company shall not dispose of any data, records or reports or any core, pulps or samples without the prior consent of each Member, and the Company shall assure the safe preservation of all of the foregoing. The Manager or the Majority Member shall take reasonable actions to preserve and maintain the condition of the historic building and the mobile home, the use of which WEG has licensed to the Company in accordance with the WEG Contribution Agreement, provided that under no circumstances shall GPM or the Company be obligated to incur any expenditures in connection with any such actions required by a third party or governmental agency.

5.2.10 While GPM is acting as the Manager, it shall have the right to carry out its responsibilities hereunder through agents, Affiliates, consultants, or independent contractors.

5.2.11 The Manager shall cause the Company to perform all assessment and other work, and shall pay all Governmental Fees, required by Law in order to maintain the unpatented mining claims included within the Properties (the “Claims”). The Manager shall have the right to cause the Company to perform the assessment work required hereunder pursuant to a common plan of exploration and continued actual occupancy of such claims shall not be required. The Manager shall not be liable on account of any determination by any court or governmental agency that the work performed by the Manager does not constitute the required annual assessment work or occupancy for the purposes of preserving or maintaining ownership of the Claims, provided that the work done is performed in accordance with the Manager’s standard of care under Section 5.3. The Manager shall cause the Company to timely record with the appropriate county and file with the appropriate United States agency any required affidavits, notices of intent to hold and other documents in proper form attesting to the payment of Governmental Fees, the performance of assessment work or intent to hold the Claims, in each case in sufficient detail to reflect compliance with the requirements applicable to each Claim. The Manager shall not be liable for the loss of any of the claims on account of (a) any determination by any court or governmental agency that any such document submitted by the

Manager does not comply with applicable requirements, provided that such document is prepared and recorded or filed in accordance with the Manager’s standard of care under Section 5.3, or (b) any other governmental determination or third party action challenging the validity of the claims, so long as the Manager has conducted Operations in accordance with the Manager’s standard of care under Section 5.3. GPM shall not be liable for the loss of any of the Claims on account of (a) the claim conflicts referred to in the WEG Contribution Agreement, or (b) circumstances constituting a breach of any of WEG’s title representations and warranties set forth in the WEG Contribution Agreement.

5.2.12 If authorized by the Management Committee, the Company may: (a) locate, amend or relocate any unpatented mining claim comprising a portion of the Properties; (b) locate any fractions resulting from such amendment or relocation; (c) apply for patents or mining leases or other forms of mineral tenure for any such unpatented claims or sites; (d) abandon any unpatented mining claims for the purpose of locating mill sites or otherwise acquiring from the United States rights to the ground covered thereby; (e) abandon any unpatented mill sites for the purpose of locating mining claims or otherwise acquiring from the United States rights to the ground covered thereby; (f) exchange with or convey to the United States any of the Properties for the purpose of acquiring rights to the ground covered thereby or other adjacent ground; and (g) convert any of the unpatented claims into one or more leases or other forms of mineral tenure pursuant to any Law hereafter enacted.

5.2.13 The Manager shall cause the Company to keep and maintain all required accounting and financial records pursuant to the procedures described in Article IX and in accordance with customary cost accounting practices in the mining industry, and shall ensure appropriate separation of accounts unless otherwise agreed by the Members.

5.2.14 The Manager or the Majority Member shall cause the Company to keep and maintain all required records, make elections, and prepare and file all federal and state tax returns or other required tax forms, and perform the other duties described in Article X and Exhibit E.

5.2.15 The Manager shall cause the Company to maintain Equity Accounts and Capital Accounts for each Member as described in Article X and in Exhibit E, respectively.

5.2.16 From and after the Effective Date, the Manager shall keep the Management Committee advised of all Operations by submitting in writing to the members of the Management Committee: (a) monthly progress reports that include statements of expenditures and comparisons of such expenditures to the adopted Budget; (b) periodic summaries of data acquired; (c) copies of reports concerning Operations; (d) a detailed final report within thirty (30) days after completion of each Program and Budget, which shall include comparisons between actual and budgeted expenditures and comparisons between the objectives and results of Programs; and (e) such other reports as any member of the Management Committee may reasonably request. So long as a Member complies with the provisions of Article XII, at all reasonable times the Company shall provide to the Directors appointed by that Member to the Management Committee, or any other representative of a Member upon the request of any of the Directors appointed by that Member to the Management Committee, access to, and the right to inspect and, at such Member’s cost and expense, copy Existing Data and all

maps, drill logs and other drilling data, core, pulps, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records, and other Business Information, to the extent preserved or kept by the Company. In addition, each Member, at its sole risk, cost and expense, and subject to reasonable safety regulations, shall have the right to inspect the Assets and Operations at all reasonable times, so long as such inspection does not unreasonably interfere with Operations. Any Member (at its sole expense) may install security cameras and/or retain an onsite employee to ensure it is receiving its pro rata share of Net Cash Flow.

5.2.17 The Manager shall prepare an Environmental Compliance plan for all Operations consistent with the requirements of any applicable Laws or contractual obligations and shall include in each Program and Budget sufficient funding to implement the Environmental Compliance plan and to satisfy the financial assurance requirements of any applicable Law or contractual obligation pertaining to Environmental Compliance. To the extent practical, the Environmental Compliance plan shall incorporate concurrent reclamation of Properties disturbed by Operations.

5.2.18 The Manager shall undertake to cause the Company to perform Continuing Obligations when and as economic and appropriate, whether before or after termination of the Company. The Company shall have the right to delegate performance of Continuing Obligations to persons having demonstrated skill and experience in relevant disciplines. As part of each Program and Budget submittal, there shall be specified in such Program and Budget the measures to be taken for performance of Continuing Obligations and the cost of such measures. The Company shall keep the Members reasonably informed about efforts to discharge Continuing Obligations. Authorized representatives of each Member shall have the right from time to time to enter the Properties to inspect and monitor (either in person, electronically and/or by video surveillance) work directed toward satisfaction of Continuing Obligations and audit books, records, and related accounts and past and present documents, respecting the Properties.

5.2.19 The funds that are to be deposited into the Environmental Compliance Fund shall be maintained in a separate, interest bearing cash management account in the name of the Company, which may include, but is not limited to, money market investments and money market funds, and/or in longer term investments if approved by the Management Committee. Such funds shall be used solely for Environmental Compliance and Continuing Obligations, including the committing of such funds, interests in property, insurance or bond policies, or other security to satisfy Laws regarding financial assurance for the reclamation or restoration of the Properties, and for other Environmental Compliance requirements.

5.2.20 If Ownership Interests are adjusted in accordance with this Agreement the Schedule of Members shall be modified to properly reflect such adjustment and shall propose from time to time one or more methods for fairly allocating costs for Continuing Obligations.

5.2.21 The Manager or, after the Stand-Alone Date, the Mine General Manager, shall cause the Company to undertake all other activities reasonably necessary to fulfill the foregoing, and to implement the policies, objectives, procedures, methods and actions determined by the Management Committee pursuant to Article IV.

5.2.22 The Ashdown Mill, located within the AOI, is an Asset of the Company and the Management Committee shall have the right, at any time when the Mill has excess capacity available and in a manner that does not unreasonably interfere with Operations, to direct that the Mill be used in connection with toll and other milling arrangements, either with Members or with third parties. All net revenues generated by such activities will be distributed to the Members in accordance with their Ownership Interests.

5.3 Standard of Care. The Manager shall discharge its duties under Section 5.2 and conduct all Operations in a good, workmanlike and efficient manner, in accordance with sound mining and other prevailing applicable industry standards and practices, and in accordance with Laws and with the terms and provisions of leases, licenses, permits, contracts and other agreements pertaining to the Assets. The Manager shall not be liable to the other Member for any act or omission resulting in damage or loss except to the extent caused by or attributable to the Manager’s willful misconduct or gross negligence. The Manager shall not be in default of any of its duties or obligations under Section 5.2 or otherwise under this Agreement or have any liability of any kind to the other Member or the Company if its inability or failure to perform results from the failure of the other Member to perform acts or to contribute amounts required of it by this Agreement, or from the Company having insufficient funds on hand to allow the Manager to perform any such duties or obligations. The Manager acting under this Agreement shall not be liable to the Company or to the other Member for the Manager’s good faith reliance on information, opinions, reports or statements presented to the Manager by the Management Committee, or any of the Company’s employees, or by any other person or entity as to matters the Manager reasonably believes are within such other person’s or entity’s professional or technical competence and who has been selected with reasonable care by or on behalf of the Company.

5.4 Resignation; Deemed Offer to Resign. Prior to the Stand-Alone Date, the Manager may resign upon not less than one month’s prior notice to the other Member, in which case the other Member may elect to become the new Manager by notice to the resigning Member within ten (10) days after the notice of resignation. If any of the following shall occur prior to the Stand-Alone Date, the Manager shall be deemed to have resigned upon the occurrence of the event described in each of the following Sections, with the successor Manager to be appointed by the other Member at a subsequently called meeting of the Management Committee, at which the Manager shall not be entitled to vote. The other Member may appoint itself or a third party as the Manager.

5.4.1 The aggregate Ownership Interest of the Manager and its Affiliates becomes less than fifty (50%);

5.4.2 Subject to the provisions of Section 5.3, the Manager fails to perform a material obligation imposed upon it under this Agreement, including preparation of Programs and Budgets, and such failure continues for a period of sixty (60) days after notice from the other Member demanding performance subject to the Manager’s right to dispute the assertion that it has failed to perform the material obligation in question;

5.4.3 A receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for a substantial part of its assets is appointed and such appointment is neither made

ineffective nor discharged within sixty (60) days after the making thereof, or such appointment is consented to, requested by, or acquiesced to by the Manager; or

5.4.4 Entry is made against the Manager of a judgment, decree or order for relief affecting its ability to serve as Manager or a substantial part of its Ownership Interest or its other assets by a court of competent jurisdiction in a case commenced under any applicable bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in effect.

Under Sections 5.4.3 or 5.4.4 above, the appointment of a successor Manager shall be deemed to pre-date the event causing a deemed resignation.

5.5 Payments to Manager. The Manager shall be compensated for its services and reimbursed for its costs hereunder in accordance with Section 9.3.14.

5.6 Transactions with Affiliates. If the Manager engages Affiliates to provide services, it shall do so on terms no less favorable than would be the case in arm’s-length, competitively priced transactions with unrelated parties.

5.7 Activities During Deadlock. If the Management Committee for any reason fails to adopt an initial or any subsequent Program and Budget, Operations shall continue to be funded at levels sufficient to maintain the Properties, subject to the contrary direction of the Management Committee and the receipt of necessary funds.

ARTICLE VI

PROGRAMS AND BUDGETS

6.1 Operations Pursuant to Programs and Budgets. Except as set forth in Section 6.2, Operations shall be conducted, expenses shall be incurred, and Assets shall be acquired only pursuant to adopted Programs and Budgets. Every Program and Budget adopted pursuant to this Agreement shall provide for accrual of reasonably anticipated Environmental Compliance expenses for all Operations contemplated under the Program and Budget.

6.2 Initial Programs and Budgets. Attached as Exhibit J hereto is an initial Program and Budget which has been approved and adopted by the Management Committee through the end of October. With respect to that initial Program and Budget, each Member agrees, notwithstanding any provision of this Agreement to the contrary, to provide funds to the Company for its proportionate share of that Program and Budget for the month of October, not later than October 5, 2006. Within fifteen (15) days after the Effective Date, the Manager shall deliver to the Management Committee a proposed follow-up Program and Budget for the month of November. On or before November 15, 2006, the Manager shall prepare and deliver to the Management Committee a proposed Program and Budget for Operations for the following calendar month, and the provisions of Sections 6.4-6.8 below shall apply to such proposed Programs and Budgets.

6.3 Quarterly Programs and Budgets. On or before December 15, 2006, the Manager shall prepare and deliver to the Management Committee a proposed Program and Budget for Operations for the following calendar quarter, and the provisions of Sections 6.4-6.8

below shall apply to such proposed Program and Budget. This Program and Budget shall include plans and costs for completing a preliminary Feasibility Study of the gold resource on the Properties as identified by previous feasibility studies performed with respect to the Properties. Thereafter, the Manager shall prepare and deliver to the Management Committee a proposed Program and Budget for Operations at least fifteen (15) days before the end of each calendar quarter for the following calendar quarter, and the provisions of Sections 6.4-6.8 below shall apply to such proposed Program and Budget.

6.4 Presentation of Programs and Budgets. Except for the Programs and Budgets referred to in Sections 6.2 and 6.3, above, proposed Programs and Budgets shall be prepared by the Manager for a period of one year, or any other Period approved by the Management Committee. Each Program and Budget shall be submitted to the Management Committee for review and consideration thirty (30) days prior to the end of the Period. All proposed Programs and Budgets may include Exploration, Feasibility Study, Development, Mining and Expansion or Modification Operations components, or any combination thereof, and shall be reviewed and voted upon by the Management Committee in accordance with Sections 4.2 and 6.5. Each Program and Budget adopted by the Management Committee for any Period longer than a calendar quarter shall be reviewed at least once per calendar quarter at a meeting of the Management Committee.

6.5 Review and Adoption of Proposed Programs and Budgets. Within fifteen (15) days after submission of a proposed Program and Budget (or ten (10) days after submission of any Programs and Budget which covers a Period of three months or less), each Member shall submit in writing to the Management Committee:

6.5.1 Notice that the Member approves any or all of the components of the proposed Program and Budget; or

6.5.2 Modifications proposed by the Member to the components of the proposed Program and Budget; or

6.5.3 Notice that the Member rejects any or all of the components of the proposed Program and Budget.

6.5.4 If a Member fails to give any of the foregoing responses within the allotted time, the failure shall be deemed to be a vote by the Member for adoption of the Manager’s proposed Program and Budget. If a Member makes a timely submission to the Management Committee pursuant to Sections 6.5.1, 6.5.2, or 6.5.3 above, then the Manager working with the other Member shall seek for a period of time not to exceed fifteen (15) days (or five (5) days with respect to Programs and Budgets which cover Periods of three months or less) to develop a Program and Budget acceptable to both Members. In this case the regularly scheduled quarterly meeting will be delayed until a Program and Budget acceptable to both Members has been developed, at which time Manager shall then call a special Management Committee meeting in accordance with Section 4.3 for purposes of reviewing and voting upon the proposed Program and Budget. If the Members have failed to agree on a Program and Budget within thirty (30) days (ten (10) days with respect to Programs and Budgets which cover

Periods of three months or less) after its proposal by the Manager, the provisions of Section 5.7 shall apply.

6.5.5 The Manager may propose amendments (“Amendments”) to the currently approved Program and Budget from time to time prior to incurring costs under such Amendment. In such event, the Members shall have fifteen (15) days after the proposal of a Amendments in which to submit to the Management Committee one of the responses set forth in Sections 6.5.1, 6.5.2 or 6.5.3 above (substituting “Amendment” for “Program and Budget” in each case). If a Member makes a timely submission to the Management Committee pursuant to Sections 6.5.1, 6.5.2, or 6.5.3, above, then the Manager working with the other Member shall seek for a period of time not to exceed fifteen (15) days (or five (5) days with respect to Programs and Budgets which cover Periods of less than three months) to develop an Amendment acceptable to both Members. In this case the regularly scheduled quarterly meeting will be delayed until an Amendment acceptable to both Members have been developed, at which time the Manager or the Majority Member shall then call a special Management Committee meeting in accordance with Section 4.3 for purposes of reviewing and voting upon the proposed Amendments. If the Management Committee fails to adopt any Amendment within thirty (30) days (ten (10) days with respect to Programs and Budgets which cover Periods of less than three months) after its proposal by the Manager, then Operations shall continue under the currently approved Program and Budget.

6.6

Election to Participate.

6.6.1 (a) With respect to (i) all of the Programs and Budgets described in Section 6.2, (ii) each Program and Budget described in Section 6.3 until the first proposed quarterly Program and Budget after the first full calendar quarter during which Operations at the Properties have resulted in positive Net Cash Flow, (iii) any proposed Program and Budget thereafter in which Operations have not resulted in positive Net Cash Flow for the period covered by the previous Program and Budget, and (iv) proposed Programs and Budgets for any Expansion or Modification of Operations, each Member, by notice to the Management Committee within ten (10) calendar days after the final vote adopting such a Program and Budget, and notwithstanding its vote concerning adoption of that Program and Budget, may elect to participate in the approved Program and Budget: (i) in proportion to its respective Ownership Interest; (ii) in some lesser amount than its respective Ownership Interest; or (iii) not at all. In case of an election under (ii) or (iii) above, that Member’s Ownership Interest shall be recalculated as provided in Section 6.6.2 below, with dilution effective as of the first day of the Program Period for the adopted Program and Budget. If a Member fails to so notify the Management Committee of the extent to which it elects to participate, the Member shall be deemed to have elected to contribute to such Program and Budget in proportion to its respective Ownership Interest as of the beginning of the Program Period.

(b) With respect to each subsequent proposed Program and Budget to which Subsection 6.6.1(a) does not apply, neither Member shall be required to make any contribution to the capital of the Company, except for contributions approved unanimously by the Management Committee, and with respect to such Programs and Budgets, recalculation of Ownership Interests will be determined by the Management Committee.

6.6.2 If a Member elects pursuant to Section 6.6.1(a) to contribute to an adopted Program and Budget some lesser amount than in proportion to its respective Ownership Interest, or not at all, and the other Member elects to fund all or any portion of the deficiency, the Ownership Interest of the Reduced Member shall be provisionally recalculated by dividing: (a) the sum of (1) the amount credited to the Reduced Member’s Equity Account with respect to its contribution under the Contribution Agreement; (2) the total of all of the Reduced Member’s contributions to the Company under Section 6.6.1 or otherwise pursuant to this Agreement; and (3) the amount, if any, the Reduced Member elects to contribute to the adopted current Program and Budget; by (b) the sum of (1), (2) and (3) above for both Members; and then multiplying the result by one hundred. The Ownership Interest of the other Member shall be increased by the amount of the reduction in the Ownership Interest of the Reduced Member, and if the other Member elects not to fund the entire deficiency, the Manager shall adjust the Program and Budget to reflect the funds available.

6.6.3 Whenever the Ownership Interests are recalculated pursuant to this Section 6.6, (a) the Equity Accounts of both Members shall be revised to bear the same ratio to each other as their recalculated Ownership Interests; (b) the Schedule of Members shall be amended to reflect the recalculated Ownership Interests; and (c) the portion of Capital Account attributable to the reduced Ownership Interest of the Reduced Member shall be transferred to the other Member.

6.7 Recalculation or Restoration of Reduced Interest Based on Actual Expenditures.

6.7.1 If a Member makes an election under Section 6.6.1(a)(i), (ii), (iii) or (iv), then within thirty (30) days after the conclusion of such Program and Budget, the Manager shall report the total amount of money expended plus the total obligations incurred by the Manager for such Budget.

6.7.2 If the Company expended or incurred obligations that were more or less than the adopted Budget, the Ownership Interests shall be recalculated pursuant to Section 6.6.2 by substituting each Member’s actual contribution to the adopted Budget for that Member’s estimated contribution at the time of the Reduced Member’s election under Section 6.6.1.

6.7.3 If the Company expended or incurred obligations of less than eighty percent (80%) of the adopted Budget, within thirty (30) days after receiving the Manager’s report on expenditures, the Reduced Member may notify the other Member of its election to reimburse the other Member for the difference between any amount contributed by the Reduced Member to such adopted Program and Budget and the Reduced Member’s proportionate share (at the Reduced Member’s former Ownership Interest) of the actual amount expended or incurred for the Program, plus interest on the difference accruing at the Prime Rate plus two (2) percentage points. The Reduced Member shall deliver the appropriate amount (including interest) to the other Member with such notice. Failure of the Reduced Member to so notify and tender such amount shall result in dilution occurring in accordance with this Article VI and shall bar the Reduced Member from exercising its rights under this Section 6.7.3 concerning the relevant adopted Program and Budget.

6.7.4 All recalculations under this Section 6.7 shall be effective as of the first day of the Program Period for the Program and Budget in question. The Company, on behalf of both Members, shall make such reimbursements, reallocations of Products, contributions and other adjustments as are necessary so that, to the extent possible, each Member will be placed in the position it would have been in had its Ownership Interests as recalculated under this Section been in effect throughout the Program Period for such Program and Budget.

6.7.5 Whenever the Ownership Interests are recalculated pursuant to this Section 6.7, (a) the Members’ Equity Accounts shall be revised to bear the same ratio to each other as their Recalculated Ownership Interests; (b) the Schedule of Members shall be amended to reflect the recalculated Ownership Interests; and (c) the Capital Accounts of the Members shall be determined without regard to Section 6.6.3, provided, that the portion of Capital Account attributable to the reduced Ownership Interest of the Reduced Member, if any, after taking into account the adjustments required by this Section 6.7 shall be transferred to the other Member.

6.8 Expansion or Modification Programs and Budgets. Any Program and Budget proposed by the Manager involving Expansion or Modification shall be based on a Feasibility Study prepared by the Company, Feasibility Contractors, or both, or prepared by the Company and audited by Feasibility Contractors, as the Management Committee determines. Any Program and Budget which includes Expansion or Modification shall be submitted for review by the Management Committee within thirty (30) days following receipt by the Manager of such Feasibility Study.

6.9 Budget Overruns; Program Changes. The Manager shall promptly notify the Management Committee of any material departure from an adopted Program and Budget. Prior to the Stand-Alone Date, if the Manager exceeds an adopted Budget by more than ten percent (10%) in the aggregate, then the excess over ten percent (10%), unless directly caused by an emergency or unexpected expenditure made pursuant to Section 6.10 below, or unless otherwise authorized or ratified by the Management Committee, shall be the sole account of the Manager, and such excess shall not be included as a charge against the Business Account. The Manager shall be promptly reimbursed for Budget overruns of ten percent (10%) or less in the aggregate by the Members in proportion to their respective Ownership Interests at the time such overruns are incurred.

6.10 Emergency or Unexpected Expenditures. In case of emergency, the Company may take any reasonable action necessary to protect life, limb or property, to protect the Assets or to comply with law or government regulation. The Manager or, after the Stand-Alone Date, the Mine General Manager, may also cause the Company to make reasonable expenditures for unexpected events which are beyond its reasonable control (and which do not result from a breach by the Manager of its standard of care set forth in Section 5.3). The Manager or the Mine General Manager shall promptly notify the Members of the emergency or unexpected expenditure, and the Company shall be reimbursed for all resulting costs incurred by it (if any) by the Members in proportion to their respective Ownership Interests at the time the emergency or unexpected expenditures are incurred.

6.11 References to the Manager . All references to the Manager set forth in this Article VI shall be deemed, after the Stand-Alone Date, to be references to the Mine General Manager.

ARTICLE VII

ACCOUNTS AND SETTLEMENTS

7.1 Monthly Statements. The Manager or, following the Stand-Alone Date, the Mine General Manager, shall promptly submit to the Management Committee monthly statements of account reflecting in reasonable detail the charges and credits to the Business Account during the preceding month.

7.2 Cash Calls. With respect to each Program and Budget to which the provisions of Section 6.6.1(a) apply, or with respect to which both Members have agreed to make contributions, the Manager shall submit at least ten (10) days prior to the last day of each month a billing for estimated cash requirements for the next month. Within ten (10) days after receipt of each billing, each Member shall advance its proportionate share of such cash requirements. The Manager or, following the Stand-Alone Date, the Mine General Manager, shall record all funds received in the Business Account. The Manager or, following the Stand-Alone Date, the Mine General Manager, shall at all times maintain a cash balance approximately equal to the rate of disbursement for up to thirty (30) days. All funds in excess of immediate cash requirements shall be invested for the benefit of the Company in cash management accounts and investments selected at the discretion of the Management Committee and in the name of the Company, which accounts may include, but are not limited to, money market investments and money market funds.

7.3 Failure to Meet Cash Calls. A Member that fails to meet reimbursement obligations (as described in Section 6.2) or cash calls in the amount and at the times specified in Section 7.2 shall be in default, and the amounts of the defaulted cash call shall bear interest from the date due at an annual rate equal to two (2) percentage points over the Prime Rate, but in no event shall the rate of interest exceed the maximum permitted by Law. Such interest shall accrue to the benefit of and be payable to the non-defaulting Member, but shall not be deemed as amounts contributed by the defaulting Member in the event dilution occurs in accordance with Section 6.6.2. In addition to any other rights and remedies available to it by Law, the non-defaulting Member shall have those other rights, remedies, and elections specified in Sections 7.4 and 7.5.

7.4 Cover Payment. If a Member defaults in making a contribution or cash call required by (a) a Program and Budget to which the provisions of Section 6.6.1(a) apply, or (b) an adopted Program and Budget to which that Member has agreed to contribute, the non-defaulting Member may, but shall not be obligated to, advance some portion or all of the amount in default on behalf of the defaulting Member (a “Cover Payment”). Each and every Cover Payment shall constitute a demand loan bearing interest from the date of the advance at the rate provided in Section 7.3. If more than one Cover Payment is made, the Cover Payments shall be aggregated and the rights and remedies pertaining to an individual Cover Payment shall apply to the aggregated Cover Payments. The failure to repay such loan upon demand shall be a default.

7.5 Remedies. The Members acknowledge that if either Member defaults in making a cash call, or in repaying a loan, as required under Sections 7.2, 7.3 or 7.4, whether or not a Cover Payment is made, it will be difficult to measure the damages resulting from such default (it being understood and agreed that the Members have attempted to determine such damages in advance and determined that the calculation of such damages cannot be ascertained with reasonable certainty). Both Members acknowledge and recognize that the damage to the non-defaulting Member could be significant. In the event of such default, as reasonable liquidated damages, the non-defaulting Member may, with respect to any such default not cured by repayment of the defaulted amount plus interest from the due date at an annual rate equal to seven (7) percentage points over the Prime Rate, within thirty (30) days after notice to the defaulting Member of such default, elect any of the following remedies by giving notice to the defaulting Member. Such election may be made with respect to each failure to meet a cash call relating to a Program and Budget, regardless of the frequency of such cash calls, provided such cash calls are made in accordance with Section 7.2.

7.5.1 The defaulting Member grants to the non-defaulting Member a power of sale as to all or any portion of its Ownership Interest or of its interest in any Assets, upon a default under Sections 7.3 or 7.4. Such power shall be exercised in the manner provided by applicable Law or otherwise in a commercially reasonable manner and upon reasonable notice. If the non-defaulting Member elects to enforce the lien or security interest pursuant to the terms of this Section, the defaulting Member shall be deemed to have waived any available right of redemption, any required valuation or appraisal of the secured property prior to sale, any available right to stay execution or to require a marshaling of assets, and any required bond in the event a receiver is appointed, and the defaulting Member shall be liable for any deficiency.

7.5.2 The non-defaulting Member may elect to have the defaulting Member’s Ownership Interest diluted or eliminated as follows:

(a) The Reduced Member’s Ownership Interest shall be recalculated by dividing: (i) the sum of (A) the value of the Reduced Member’s Initial Contribution, as applicable; (B) the total of all of the Reduced Member’s contributions to the Company pursuant to the Contribution Agreements or otherwise pursuant to this Agreement; and (C) the amount, if any, the Reduced Member contributed to the adopted current Program and Budget with respect to which the default occurred; by (ii) the sum of (A), (B) and (C) above for both Members; and then multiplying the result by eighty percent (80%). The Ownership Interest of the other Member shall be increased by the amount of the reduction in the Ownership Interest of the Reduced Member, including the further reduction under this Section 7.5.2.

(b) For a default relating to a Program and Budget covering in whole or in part Expansion or Modification to which the defaulting Member has agreed to contribute, at the non-defaulting Member’s election, the defaulting Member shall be deemed to have withdrawn and to have automatically relinquished its interest in the Assets to the non-defaulting Member; provided, however, the defaulting Member shall have the right to receive only from ten percent (10%) of Net Profits, if any, and not from any other source, an amount equal to eighty percent (80%) of the defaulting Member’s Equity Account balance at the time of such default. Upon receipt of such amount the defaulting Member shall thereafter have no further right, title or interest in the Assets.

(c) Dilution under this Section 7.5.2 shall be effective as of the date of the original default, and Section 6.7 shall not apply. The amount of any Cover Payment under Section 7.4 and interest, or any interest accrued in accordance with Section 7.3, shall be deemed to be amounts contributed by the non-defaulting Member, and not as amounts contributed by the defaulting Member.

(d) Whenever the Ownership Interests are recalculated pursuant to this Section 7.5.2, (i) the Equity Accounts of both Members shall be adjusted to bear the same ratio to each other as their recalculated Ownership Interests; and (ii) the portion of Capital Account attributable to the reduced Ownership Interest of the Reduced Member shall be transferred to the other Member.

7.5.3 If a Member has defaulted in meeting a cash call or repaying a loan, and if the non-defaulting Member has made a Cover Payment, then, in addition to a reduction in the defaulting Member’s Ownership interest effected pursuant to Section 7.5.2, the non-defaulting Member shall have the right, if the indebtedness arising from a default or Cover Payment is not discharged within fifteen (15) days after the default and upon not less than thirty (30) days advance notice to the defaulting Member, to elect to purchase all the right, title, and interest, whenever acquired or arising, of the defaulting Member in the Company and Assets, including but not limited to its Ownership Interest or interest in Net Smelter Returns, together with all proceeds from and accessions of the foregoing (collectively the “Defaulting Member’s Entire Interest”) at a purchase price equal to eighty percent (80%) of the fair market value thereof as determined by a qualified independent appraiser appointed by the non-defaulting Member. If the defaulting Member conveys notice of objection to the person so appointed within ten (10) days after receiving notice thereof, then an independent and qualified appraiser shall be appointed by the joint action of the appraiser appointed by the non-defaulting Member and a qualified independent appraiser appointed by the defaulting member; however, that if the defaulting Member fails to designate a qualified independent appraiser for such purpose within ten (10) days after giving notice of such objection, then the person originally designated by the non-defaulting Member shall serve as the appraiser; provided further, that if the appraisers appointed by each of the Members fail to appoint a third qualified independent appraiser within five (5) days after the appointment of the last of them, then an appraiser shall be appointed by a judge of a court of competent jurisdiction in the state in which the Assets are situated upon the application of either Member. There shall be withheld from the purchase price payable, upon transfer of the Defaulting Member’s Entire Interest, the amount of any Cover Payment under Section 7.4 and unpaid interest thereon to the date of such transfer. Upon payment of such purchase price, the defaulting Member shall be deemed to have relinquished all of the Defaulting Member’s Entire Interest to the non-defaulting Member. The fees of all appraisers appointed pursuant to the provisions of this Section 7.5 shall be split evenly between the Members.

ARTICLE VIII

DISTRIBUTION OF NET CASH FLOW

8.1 Monthly Statements. The Manager or, following the Stand-Alone Date, the Mine General Manager, shall promptly submit to the Management Committee monthly

statements of account reflecting in reasonable detail the charges and credits to the Business Account during the preceding month.

8.2

Audits.

8.2.1 Within 90 (ninety) days after the end of each calendar year, an audit shall be completed by certified public accountants selected by, and independent of, either Member. The audit shall be conducted in accordance with generally accepted auditing standards and shall cover all books and records maintained by the Company pursuant to this Agreement, all Assets and Encumbrances, and all transactions and Operations conducted during such calendar year, including production and inventory records and all costs for which the Manager sought reimbursement under this Agreement (prior to the Stand-Alone Date), together with all other matters customarily included in such audits. All written exceptions to and claims for discrepancies disclosed by such audit shall be made not more than three (3) months after receipt of the audit report, unless either Member elects to conduct an independent audit pursuant to Section 8.2.2 below which is ongoing at the end of such three (3) month period, in which case such exceptions and claims may be made within the period provided in Section 8.2.2. Failure to make any such exception or claim within such period shall mean the audit is deemed to be correct and binding upon the Members. The cost of all audits under this Section 8.2.1 shall be charged to the Business Account.

8.2.2 Notwithstanding the annual audit conducted pursuant to Section 8.2.1, each Member shall have the right to have an independent audit of all Company books, records and accounts, including all charges to the Business Account. This audit shall review all issues raised by the requesting Member, with all costs borne by the requesting Member. The requesting Member shall give the other Member thirty (30) days prior notice of such audit. Any audit conducted on behalf of either Member shall be made during the Company’s normal business hours and shall not interfere with Operations. Neither Member shall have the right to audit records and accounts of the Company relating to transactions or Operations more than twenty-four (24) months after the calendar year during which such transactions, or transactions related to such Operations, were charged to the Business Account. All written exceptions to and claims for discrepancies disclosed by such audit shall be made not more than three (3) months after completion and delivery of such audit, or they shall be deemed waived.

8.3

Distributions of Net Cash Flow.

8.3.1

Net Cash Flow is defined as set forth in Exhibit A.

8.3.2 No Member is entitled to any part of the other Member’s share of Distributions and no Member may encumber the other Member’s share of Distributions, Properties or Assets without the prior written agreement of the other Member, except as noted in Article II. No Member shall have any obligation to account to the other Member for, nor have any interest or right of participation in any profits or proceeds from, nor have any obligation to share in any losses from, futures contracts, forward sales, trading in puts, calls, options or any similar hedging, price protection or marketing mechanism employed by a Member with respect to its proportionate share of any Products from the Company.

8.3.3 The Company shall receive all revenue from the sale of Products and Assets and use this revenue to pay all Expenditures for Operations. However, the Company is required to distribute a minimum of 25% of Net Cash Flow as defined in this Article VIII and Exhibit A according to each Member’s Ownership Interest as directed by the Management Committee (or an amount in excess of 25%, as directed by the Management Committee), no less frequently than once each calendar quarter (“Distributions”). If it is not economically feasible to make these Distributions, or if additional funds to continue or expand Production Operations are required, the amount of the Distributions or the additional funding shall be determined by unanimous consent of the Management Committee, as provided in Section 4.5. Except as otherwise provided in Exhibit E, all Distributions by the Company to the Members shall be made in accordance with the Members’ respective Ownership Interests at the time such Distribution is made.

ARTICLE IX

FISCAL YEAR AND ACCOUNTING PROCEDURES

The purpose of this Article IX is to establish equitable methods for determining charges and credits applicable to Operations. It is the intent of the Members that no Member shall lose or profit by reason of the designation of one of them to exercise the duties and responsibilities of the Manager. The Members shall meet and in good faith endeavor to agree upon changes deemed necessary to comply with the previous sentence. Following the Stand-Alone Date, the Mine General Manager shall cause the Company to perform all of the obligations set forth in this Article IX.

9.1

Fiscal Year. The fiscal year of the Company shall be the calendar year.

9.2

Accounting Procedures.

9.2.1 General Accounting Records. The Company shall maintain detailed and comprehensive cost accounting records in accordance with these Accounting Procedures and in accordance with generally accepted accounting principles on a consistent basis, including general ledgers, supporting and subsidiary journals, invoices, checks and other customary documentation, sufficient to provide a record of revenues and expenditures and periodic statements of financial position and the results of Operations for managerial, tax, regulatory or other financial, regulatory, or legal reporting purposes related to the Company. Such records shall be retained for the duration of the period allowed the Members for audit or the period necessary to comply with tax or other regulatory requirements. The records shall reflect all obligations, advances and credits of the Members.

9.2.2 Cash Management Accounts. The Company shall maintain one or more separate cash management accounts in the name of the Company for the payment of all expenses and the deposit of all cash receipts for the Company.

(a) Deposits. All monies from sales of Products or other Assets shall be deposited into one of the above-referenced accounts owned by the Company and not into accounts owned by Members.

(b) Payments. All payments from any of the above-referenced accounts owned by the Company above $5,000 shall require signatures by a representative of the Manager (or the Mine General Manager) and by a representative of the other Member (or both Members after the Stand-Alone Date).

9.2.3 Equity Accounts. The Company shall maintain Equity Accounts for each Member. Each Member’s Equity Account shall be credited with the value of such Member’s contributions as applicable, and shall be credited with any additional amounts contributed by such Member to the Company. Each Member’s Equity Account shall be charged with the cash and the fair market value of property distributed to such Member (net of liabilities assumed by such Member and liabilities to which such distributed property is subject). Contributions and distributions shall include all cash contributions or distributions plus the agreed value (expressed in dollars) of all in-kind contributions or distributions. So

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