Exhibit 10.9
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND
MINE OPERATING AGREEMENT
between
CANYON RESOURCES CORPORATION
and
NEW HORIZON URANIUM CORPORATION
EFFECTIVE DATE: January 23, 2006

 

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TABLE OF CONTENTS

                              Page   ARTICLE I   DEFINITIONS AND
CROSS-REFERENCES     1  
 
  1.1   Definitions     1  
 
  1.2   Cross-References     1  
 
                ARTICLE II   NAME, PURPOSES AND TERM     1  
 
  2.1   General     1  
 
  2.2   Name     2  
 
  2.3   Purposes     2  
 
  2.4   Limitation     2  
 
  2.5   Term     2  
 
                ARTICLE III   REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS;
INDEMNITIES     3  
 
  3.1   Representations and Warranties of Both Participants     3  
 
  3.2   Representations and Warranties of Canyon     3  
 
  3.3   Disclosures     5  
 
  3.4   Record Title     5  
 
  3.5   Loss of Title     5  
 
  3.6   Royalties, Production Taxes and Other Payments Based on Production     6
 
 
  3.7   Indemnities/Limitation of Liability     6  
 
                ARTICLE IV   RELATIONSHIP OF THE PARTICIPANTS     8  
 
  4.1   No Partnership     8  
 
  4.2   Federal Tax Elections and Allocations     8  
 
  4.3   State Income Tax     8  
 
  4.4   Tax Returns     8  
 
  4.5   Other Business Opportunities     8  
 
  4.6   Waiver of Rights to Partition or Other Division of Assets     9  
 
  4.7   Transfer or Termination of Rights to Properties     9  
 
  4.8   Implied Covenants     9  
 
  4.9   No Third Party Beneficiary Rights     9  

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                              Page   ARTICLE V   CONTRIBUTIONS BY PARTICIPANTS  
  9  
 
  5.1   Participants’ Initial Contributions     9  
 
  5.2   Failure to Make Initial Contribution     11  
 
  5.3   Additional Contributions     12  
 
                ARTICLE VI   INTERESTS OF PARTICIPANTS     13  
 
  6.1   Initial Participating Interests     13  
 
  6.2   Changes in Participating Interests     13  
 
  6.3   Elimination of Minority Interest     14  
 
  6.4   Continuing Liabilities Upon Adjustments of Participating Interests    
15  
 
  6.5   Documentation of Adjustments to Participating Interests     15  
 
  6.6   Grant of Lien and Security Interest     16  
 
  6.7   Subordination of Interests     16  
 
                ARTICLE VII   MANAGEMENT COMMITTEE     16  
 
  7.1   Organization and Composition     16  
 
  7.2   Decisions     17  
 
  7.3   Meetings     17  
 
  7.4   Action Without Meeting in Person     18  
 
  7.5   Matters Requiring Approval     18  
 
                ARTICLE VIII   MANAGER     18  
 
  8.1   Appointment     18  
 
  8.2   Powers and Duties of Manager     19  
 
  8.3   Standard of Care     23  
 
  8.4   Resignation; Deemed Offer to Resign     24  
 
  8.5   Payments To Manager     25  
 
  8.6   Transactions With Affiliates     25  
 
  8.7   Activities During Deadlock     25  

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                              Page   ARTICLE IX   PROGRAMS AND BUDGETS     25  
 
  9.1   Initial Program and Budget     25  
 
  9.2   Operations Pursuant to Programs and Budgets     25  
 
  9.3   Presentation of Programs and Budgets     25  
 
  9.4   Review and Adoption of Proposed Programs and Budgets     26  
 
  9.5   Election to Participate     26  
 
  9.6   Recalculation or Restoration of Reduced Interest Based on Actual
Expenditures     27  
 
  9.7   Pre-Feasibility Study Program and Budgets     28  
 
  9.8   Completion of Pre-Feasibility Studies and Selection of Approved
Alternatives     30  
 
  9.9   Programs and Budgets for Feasibility Study     31  
 
  9.10   Development Programs and Budgets; Project Financing     31  
 
  9.11   Expansion or Modification Programs and Budgets     32  
 
  9.12   Budget Overruns; Program Changes     32  
 
  9.13   Emergency or Unexpected Expenditures     32  
 
                ARTICLE X   ACCOUNTS AND SETTLEMENTS     33  
 
  10.1   Monthly Statements     33  
 
  10.2   Cash Calls     33  
 
  10.3   Failure to Meet Cash Calls     33  
 
  10.4   Cover Payment     34  
 
  10.5   Remedies     34  
 
  10.6   Audits     35  
 
                ARTICLE XI   DISPOSITION OF PRODUCTION     36  
 
  11.1   Taking In Kind     36  
 
  11.2   Failure of Participant to Take In Kind     36  
 
  11.3   Hedging     36  

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                              Page   ARTICLE XII   WITHDRAWAL AND TERMINATION  
  37  
 
  12.1   Termination by Expiration or Agreement     37  
 
  12.2   Termination by Deadlock     37  
 
  12.3   Withdrawal     37  
 
  12.4   Continuing Obligations and Environmental Liabilities     37  
 
  12.5   Disposition of Assets on Termination     37  
 
  12.6   Non-Compete Covenants     38  
 
  12.7   Right to Data After Termination     38  
 
  12.8   Continuing Authority     38  
 
                ARTICLE XIII   ACQUISITIONS WITHIN AREA OF INTEREST     39  
 
  13.1   General     39  
 
  13.2   Notice to Non-Acquiring Participant     39  
 
  13.3   Option Exercised     39  
 
  13.4   Option Not Exercised     40  
 
                ARTICLE XIV   ABANDONMENT AND SURRENDER OF PROPERTIES     40  
 
                ARTICLE XV   SUPPLEMENTAL BUSINESS AGREEMENT        
 
  15.1   Supplemental Business Agreement     40  
 
  15.2   Subdivided Area of Interest     41  
 
                ARTICLE XVI   TRANSFER OF INTEREST; PREEMPTIVE RIGHT     41  
 
  16.1   General     41  
 
  16.2   Limitations on Free Transferability     41  
 
  16.3   Preemptive Right     43  
 
                ARTICLE XVII   DISPUTES     44  
 
  17.1   Governing Law     44  
 
  17.2   Venue     44  
 
  17.3   Alternative Dispute Resolution     44  
 
  17.4   Fees and Costs     45  

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                              Page   ARTICLE XVIII   CONFIDENTIALITY, OWNERSHIP,
USE AND DISCLOSURE OF INFORMATION     45  
 
  18.1   Business Information     45  
 
  18.2   Participant Information     45  
 
  18.3   Permitted Disclosure of Confidential Business Information     46  
 
  18.4   Disclosure Required By Law     46  
 
  18.5   Public Announcements     47  
 
                ARTICLE XIX   GENERAL PROVISIONS     47  
 
  19.1   Notices     47  
 
  19.2   Gender     48  
 
  19.3   Currency     48  
 
  19.4   Headings     48  
 
  19.5   Waiver     48  
 
  19.6   Modification     48  
 
  19.7   Force Majeure     49  
 
  19.8   Rule Against Perpetuities     49  
 
  19.9   Further Assurances     49  
 
  19.10   Entire Agreement; Successors and Assigns     50  
 
  19.11   Memorandum     50  
 
  19.12   Counterparts     50  
 
                EXHIBIT A   ASSETS AND AREA OF INTEREST         EXHIBIT B  
ACCOUNTING PROCEDURES         EXHIBIT C   TAX MATTERS         EXHIBIT D  
DEFINITIONS         EXHIBIT E   PRODUCTION ROYALTY         EXHIBIT F   INITIAL
PROGRAM AND BUDGET        

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CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
          This CONVERSE URANIUM PROJECT EXPLORATION, DEVELOPMENT AND MINE
OPERATING AGREEMENT (“Agreement”) is made as of January 23, 2006 (“ Effective
Date”) between Canyon Resources Corporation, a Delaware corporation (“Canyon”),
with an office located at 14142 Denver West Parkway, Suite 250, Golden, CO 80401
and New Horizon Uranium Corporation, a British Columbia corporation (“
Horizon”), with an office located at 2221 East Street, Suite 200, Golden,
Colorado 80401.
RECITALS
          A. Canyon owns or controls certain Properties and other Assets located
in or concerning Converse and Niobrara Counties, State of Wyoming, which
Properties and other Assets are described further in Exhibit A and defined in
Exhibit D.
          B. Horizon wishes to participate with Canyon in the exploration,
evaluation and if justified the development and mining of mineral resources
within the Properties, and Canyon is willing to grant such rights to Horizon.
          NOW THEREFORE, in consideration of the covenants and conditions
contained herein, Canyon and Horizon agree as follows:
ARTICLE I
DEFINITIONS AND CROSS-REFERENCES
          1.1 Definitions. The terms defined in Exhibit D and elsewhere shall
have the defined meaning wherever used in this Agreement, including in Exhibits.
          1.2 Cross-References. References to “Exhibits,” “Articles,” “Sections”
and “Subsections” refer to Exhibits, Articles, Sections and Subsections of this
Agreement. References to “Paragraphs” and “Subparagraphs” refer to paragraphs
and subparagraphs of the referenced Exhibits.
ARTICLE II
NAME, PURPOSES AND TERM
          2.1 General. Canyon and Horizon hereby enter into this Agreement for
the purposes hereinafter stated. All of the rights and obligations of the
Participants in connection with the Assets or the Area of Interest and all
Operations shall be subject to and governed by this Agreement.

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          2.2 Name. The Assets shall be managed and operated by the Participants
under the name of the “Converse Joint Venture”. The Manager shall accomplish any
registration required by applicable assumed or fictitious name statutes and
similar statutes.
          2.3 Purposes. This Agreement is entered into for the following
purposes and for no others, and shall serve as the exclusive means by which each
of the Participants accomplishes such purposes:

  (a)   to conduct Exploration within the Area of Interest,     (b)   to acquire
additional real property and other interests within the Area of Interest
including contractual rights of access and use of land, water, and utilities,  
  (c)   to evaluate the possible Development and Mining of the Properties, and,
if justified, to engage in Development and Mining,     (d)   to engage in
Operations on the Properties,     (e)   to engage in marketing Products, to the
extent provided by Article XI,     (f)   to complete and satisfy all
Environmental Compliance obligations and Continuing Obligations affecting the
Properties, and     (g)   to perform any other activity necessary, appropriate,
or incidental to any of the foregoing.

          2.4 Limitation. Unless the Participants otherwise agree in writing,
the Operations shall be limited to the purposes described in Section 2.3, and
nothing in this Agreement shall be construed to enlarge such purposes or to
change the relationships of the Participants as set forth in Article IV.
          2.5 Term. The term of this Agreement shall be for thirty (30) years
from the Effective Date and for so long thereafter as Products are produced from
the Properties on a continuous basis, and thereafter until all materials,
supplies, equipment and infrastructure have been salvaged and disposed of, any
required Environmental Compliance is completed and accepted and the Participants
have agreed to a final accounting, unless the Business is earlier terminated as
herein provided. For purposes hereof, Products shall be deemed to be produced
from the Properties on a “continuous

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basis” so long as production in commercial quantities is not halted for more
than one year for reasons other than Force Majeure as provided for in
Section 19.7.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS; INDEMNITIES
          3.1 Representations and Warranties of Both Participants. As of the
Effective Date, each Participant warrants and represents to the other that:
               (a) it is a corporation duly organized and in good standing in
its state or province of incorporation and it shall become qualified to do
business and shall be in good standing in those states where necessary in order
to carry out the purposes of this Agreement within thirty (30) calendar days
following the Effective Date;
               (b) it has the capacity to enter into and perform this Agreement
and all transactions contemplated herein and that all corporate, board of
directors, shareholder, surface and mineral rights owner, lessor, lessee and
other actions required to authorize it to enter into and perform this Agreement
have been properly taken;
               (c) it will not breach any other agreement or arrangement by
entering into or performing this Agreement;
               (d) it is not subject to any governmental order, judgment,
decree, debarment, sanction or Laws that would preclude the permitting or
implementation of Operations under this Agreement; and
               (e) this Agreement has been duly executed and delivered by it and
is valid and binding upon it in accordance with its terms.
          3.2 Representations and Warranties of Canyon. As of the Effective
Date, Canyon makes the following representations and warranties to Horizon:
               (a) Canyon does not own any of the Properties in fee simple.
               (b) With respect to those Properties in which Canyon holds an
interest under leases or other contracts: (i) Canyon is in exclusive possession
of such Properties; (ii) Canyon has not received any notice of default of any of
the terms or provisions of such leases or other contracts; (iii) Canyon has the
authority under such leases or other contracts to perform fully its obligations
under this Agreement; (iv) to Canyon’s knowledge, such leases and other
contracts are valid and are in good standing; (v) Canyon has no knowledge of any
act or omission or any condition on the Properties which could be considered or
construed as a default under any such lease or other

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contract; and (vi) to Canyon’s knowledge, such Properties are free and clear of
all Encumbrances or defects in title except for those specifically identified in
Paragraph 1.1 of Exhibit A.
               (c) Canyon has delivered to or made available for inspection by
Horizon all Existing Data in its possession or control, and true and correct
copies of all leases or other contracts relating to the Properties.
               (d) With respect to unpatented mining claims located by Canyon
that are included within the Properties, except as provided in Paragraph 1.1 of
Exhibit A and subject to the paramount title of the United States: (i) the
unpatented mining claims were properly laid out and monumented; (ii) all
required location and validation work was properly performed; (iii) location
notices and certificates were properly recorded and filed with appropriate
governmental agencies; (iv) all assessment work required to hold the unpatented
mining claims has been performed and all Governmental Fees have been paid in a
manner consistent with that required of the Manager pursuant to Subsection
8.2(k) through the assessment year ending August 31, 2006; (v) all affidavits of
assessment work, evidence of payment of Governmental Fees, and other filings
required to maintain the claims in good standing have been properly and timely
recorded or filed with appropriate governmental agencies; (vi) the claims are
free and clear of Encumbrances or defects in title; and (vii) Canyon has no
knowledge of conflicting mining claims. Nothing in this Subsection, however,
shall be deemed to be a representation or a warranty that any of the unpatented
mining claims contains a valuable mineral deposit.
               (e) The Properties do not include any unpatented mining claims
not located by Canyon.
               (f) With respect to the Properties, to Canyon’s knowledge, there
are no pending or threatened actions, suits, claims or proceedings, and there
have been no previous transactions affecting its interests in the Properties
which have not been for fair consideration.
               (g) Except as to matters otherwise disclosed in writing to
Horizon prior to the Effective Date,
                    (i) to Canyon’s knowledge, the conditions existing on or
with respect to the Properties and its ownership and operation of the Properties
are not in violation of any Laws (including without limitation any Environmental
Laws), nor causing or permitting any damage (including Environmental Damage, as
defined below) or impairment to the health, safety, or enjoyment of any person
at or on the Properties or in the general vicinity of the Properties;

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                    (ii) to Canyon’s knowledge, there have been no past
violations by it or by any of its predecessors in title of any Environmental
Laws or other Laws affecting or pertaining to the Properties, nor any past
creation of damage or threatened damage to the air, soil, surface waters,
groundwater, flora, fauna, or other natural resources on, about or in the
general vicinity of the Properties (“Environmental Damage”); and
                    (iii) Canyon has not received inquiry from or notice of a
pending investigation from any governmental agency or of any administrative or
judicial proceeding concerning the violation of any Laws.
               The representations and warranties set forth above shall survive
the execution and delivery of any documents of Transfer provided under this
Agreement. For a representation or warranty made to a Participant’s “knowledge,”
the term “knowledge” shall mean actual knowledge on the part of the officers,
employees, and agents of the representing Participant or of facts that would
reasonably lead to the indicated conclusions.
          3.3 Disclosures. Each of the Participants represents and warrants that
at the time this Agreement is entered into and as of the Effective Date, if
different, it is unaware of any material facts or circumstances that have not
been disclosed in this Agreement, which should be disclosed to the other
Participant in order to prevent the representations and warranties in this
Article from being materially misleading. Canyon has disclosed to Horizon all
information it believes to be relevant concerning the Assets, including without
limitation all information in its possession concerning Environmental
Liabilities, and has provided to or made available for inspection by Horizon all
such information, but does not make any representation or warranty, express or
implied, as to the accuracy or completeness of the information (except as
provided in Section 3.2) or as to the boundaries or value of the Assets. Each
Participant represents to the other that in negotiating and entering into this
Agreement it has relied solely on its own appraisals and estimates as to the
value of the Assets and upon its own geologic and engineering interpretations
related thereto.
          3.4 Record Title. Until directed otherwise by the Management
Committee, title to the Assets shall be held by Canyon for Canyon and Horizon,
as their Participating Interests are determined pursuant to this Agreement.
          3.5 Loss of Title. Any failure or loss of title to the Assets, and all
costs of defending title, shall be charged to the Business Account, except that
all costs and losses arising out of or resulting from breach of the
representations and warranties of Canyon or Horizon as to title shall be charged
to Canyon or Horizon, as the case may be.

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          3.6 Royalties, Production Taxes and Other Payments Based on
Production. The Manager shall make all required payments of production
royalties, taxes based on production of Products, and other payments out of
production to private parties and governmental entities with such payments
subject to timely reimbursement from each Participant in proportion to its
Participating Interest. The Manager undertakes to make such payments timely and
otherwise in accordance with applicable laws and agreements. The Manager may
require each Participant to advance its proportionate share and each Participant
shall timely advance such funds. The Manager shall record all funds received in
the Business Account and maintain evidence of timely payment for all such
required payments. In the event that either Participant fails to advance or
reimburse its proportionate share of any such required payment, the other
Participant shall have the right to advance such funds to cover such payment and
shall thereby become subrogated to the rights of such third party; provided,
however, that the reimbursement or advance of funds by the paying Participant to
cover the share of the other Participant shall not constitute acceptance by the
paying Participant of any liability to such third party for the underlying
obligation.
          3.7 Indemnities/Limitation of Liability.
               (a) Each Participant shall indemnify the other Participant, its
directors, officers, employees, agents and attorneys, or Affiliates
(collectively “Indemnified Participant”) from and against the entire amount of
any Material Loss. A “Material Loss” shall mean all costs, expenses, damages or
liabilities, including attorneys’ fees and other costs of litigation (either
threatened or pending) arising out of or based on a breach by a Participant
(“Indemnifying Participant”) of any representation, warranty or covenant
contained in this Agreement, including without limitation:
                    (i) any failure by a Participant to timely advance or
reimburse funds to the Manager for the Participant’s proportionate share of
required royalties, production taxes and other payments out of production due to
third parties as required by Section 3.6;
                    (ii) any action taken for or obligation or responsibility
assumed on behalf of the other Participant, its directors, officers, employees,
agents and attorneys, or Affiliates by a Participant, any of its directors,
officers, employees, agents and attorneys, or Affiliates, in violation of
Section 4.1;
                    (iii) failure of a Participant or its Affiliates to comply
with the non-compete or Area of Interest provisions of Section 12.6 or
Article XIII;
                    (iv) any Transfer that causes termination of the tax
partnership established by Section 4.2, against which the transferring
Participant shall indemnify the non-transferring Participant as provided in
Article V of Exhibit C; and

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                    (v) failure of a Participant or its Affiliates to comply
with the preemptive right under Section 16.3.
               A Material Loss shall not be deemed to have occurred until, in
the aggregate, an Indemnified Participant incurs losses, costs, damages or
liabilities in excess of One Hundred Thousand Dollars ($100,000) relating to
breaches of warranties, representations and covenants contained in this
Agreement. Canyon’s aggregate liability to all Indemnified Participants under
this Section for breaches of the representations in Subsection 3.2(g) shall not,
however, exceed Five Hundred Thousand Dollars ($500,000).
               (b) If any claim or demand is asserted against an Indemnified
Participant in respect of which such Indemnified Participant may be entitled to
indemnification under this Agreement, written notice of such claim or demand
shall promptly be given to the Indemnifying Participant. The Indemnifying
Participant shall have the right, but not the obligation, by notifying the
Indemnified Participant within thirty (30) days after its receipt of the notice
of the claim or demand, to assume the entire control of (subject to the right of
the Indemnified Participant to participate, at the Indemnified Participant’s
expense and with counsel of the Indemnified Participant’s choice), the defense,
compromise, or settlement of the matter, including, at the Indemnifying
Participant’s expense, employment of counsel of the Indemnifying Participant’s
choice. Any damages to the assets or business of the Indemnified Participant
caused by a failure by the Indemnifying Participant to defend, compromise, or
settle a claim or demand in a reasonable and expeditious manner requested by the
Indemnified Participant, after the Indemnifying Participant 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 Participant
shall be obligated to indemnify the Indemnified Participant. Any settlement or
compromise of a matter by the Indemnifying Participant shall include a full
release of claims against the Indemnified Participant which has arisen out of
the indemnified claim or demand.

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ARTICLE IV
RELATIONSHIP OF THE PARTICIPANTS
          4.1 No Partnership. Nothing contained in this Agreement shall be
deemed to constitute either Participant the partner of the other, or, except as
otherwise herein expressly provided, to constitute either Participant the agent
or legal representative of the other, or to create any fiduciary relationship
between them. The Participants do not intend to create, and this Agreement shall
not be construed to create, any mining, commercial or other partnership. Neither
Participant, nor any of its directors, officers, employees, agents and
attorneys, or Affiliates, shall act for or assume any obligation or
responsibility on behalf of the other Participant, except as otherwise expressly
provided herein, and any such action or assumption by a Participant’s directors,
officers, employees, agents and attorneys, or Affiliates shall be a breach by
such Participant of this Agreement. The rights, duties, obligations and
liabilities of the Participants shall be several and not joint or collective.
Each Participant shall be responsible only for its obligations as herein set out
and shall be liable only for its share of the costs and expenses as provided
herein, and it is the express purpose and intention of the Participants that
their ownership of Assets and the rights acquired hereunder shall be as tenants
in common.
          4.2 Federal Tax Elections and Allocations. Without changing the effect
of Section 4.1, the relationship of the Participants shall constitute a tax
partnership within the meaning of Section 761(a) of the United States Revenue
Code of 1986. Tax elections and allocations shall be made as set forth in
Exhibit C.
          4.3 State Income Tax. To the extent permissible under applicable law,
the relationship of the Participants shall be treated for state income tax
purposes in the same manner as it is for federal income tax purposes.
          4.4 Tax Returns. After approval of the Management Committee, any tax
returns or other required tax forms shall be filed in accordance with Exhibit C.
          4.5 Other Business Opportunities. Except as expressly provided in this
Agreement, each Participant shall have the right to engage in and receive full
benefits from any independent business activities or operations, whether or not
competitive with this Business, without consulting with, or obligation to, the
other Participant. The doctrines of “corporate opportunity” or “business
opportunity” shall not be applied to this Business nor to any other activity or
operation of either Participant. Neither Participant shall have any obligation
to the other with respect to any opportunity to acquire any property outside the
Area of Interest at any time, or, except as otherwise provided in Section 12.6,
within the Area of Interest after the termination of the Business. Unless
otherwise agreed in writing, neither Participant shall have any obligation to
process or otherwise treat any Products in any facility owned or controlled by
such Participant.

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          4.6 Waiver of Rights to Partition or Other Division of Assets. The
Participants hereby waive and release all rights of partition, or of sale in
lieu thereof, or other division of Assets except as provided in Article XV,
including any such rights provided by Law.
          4.7 Transfer or Termination of Rights to Properties. Except as
otherwise provided in this Agreement or as expressly agreed to by the
Participants in writing, neither Participant shall Transfer all or any part of
its interest in the Assets or this Agreement or otherwise permit or cause such
interests to terminate.
          4.8 Implied Covenants. There are no implied covenants contained in
this Agreement other than those of good faith and fair dealing.
          4.9 No Third Party Beneficiary Rights. This Agreement shall be
construed to benefit the Participants 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, except
to the extent required by Project Financing and as provided in Subsection
3.7(a).
ARTICLE V
CONTRIBUTIONS BY PARTICIPANTS
          5.1 Participants’ Initial Contributions.
               (a) Canyon, as its Initial Contribution, hereby contributes the
Assets described in Exhibit A to the purposes of this Agreement. The amount of
Two Million Dollars ($2,000,000) shall be credited to Canyon’s Equity Account on
the Effective Date with respect to Canyon’s Initial Contribution.
               (b) Subject to Horizon’s right of withdrawal as set forth in
Section 5.2, Horizon, as its Initial Contribution shall fund Operations under
Subsection 5.1(e) totaling One Million Dollars ($1,000,000.00) on or before the
third anniversary of the Effective Date, with Two Hundred Thousand Dollars
($200,000) of the Initial Contribution estimated as the minimum to be funded in
the first year following the Effective Date, Three Hundred Thousand Dollars
($300,000) of the Initial Contribution estimated to be funded in the second year
following the Effective Date, and the remaining Five Hundred Thousand Dollars
($500,000) of the Initial Contribution estimated to be funded in the third year
following the Effective Date. All funding by Horizon in excess of the stated
amount for each year shall be credited towards Horizon’s subsequent year(s)
funding commitment. Horizon may elect, at any time during the period ending on
the third anniversary of the Effective Date to complete the funding of the One
Million Dollars ($1,000,000) Initial Contribution amount, including by lump sum
payment made to the Business Account

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equal to the remaining unfunded portion of the One Million Dollar ($1,000,000)
Initial Contribution amount. In determining whether Horizon’s funding obligation
has been met, only costs that are properly chargeable to the Business Account
under Exhibit B shall be included (“Qualifying Expenses”); provided, however,
Horizon shall not be entitled to an Administrative Charge during the time it is
making Qualifying Expenses. Upon completion of the Initial Contribution funding,
such amount shall be credited to Horizon’s Equity Account.
          (c) Upon Horizon’s completion of its Initial Contribution under
Subsection 5.1(b) and concurrent with Horizon’s earn-in of its Initial
Participating Interest set forth in Section 6.1, Horizon shall tender to Canyon
five hundred thousand (500,000) Horizon common shares for no additional
consideration. Issuance of such common shares is subject to approval of
Horizon’s listing of common shares on the TSX Venture Exchange or an alternate
stock exchange solely at Horizon’s election of such exchange. Should Horizon not
have such approval within one hundred eighty (180) days of the Effective Date,
the common shares shall be issued from Horizon’s treasury shares.
          (d) Upon Horizon’s completion of its Initial Contribution under
Subsection 5.1(b) and concurrent with Horizon’s earn-in of its Initial
Participating Interest set forth in Section 6.1, Horizon shall also tender to
Canyon a warrant for the acquisition of an additional five hundred thousand
(500,000) Horizon common shares at a price equal to one hundred twenty five
percent (125%) of the then current market price of Horizon stock. The “then
current market price” shall be: i) if Horizon is a public company trading on any
Canadian or United States stock exchange at the date of tender, the thirty
(30) day trailing average price of Horizon common shares sold on the stock
exchange on which Horizon is traded on the date five (5) business days prior to
tender; or ii) if Horizon is not a publicly traded company at the date of
tender, the price of the most recent private placement completed for ownership
in Horizon.
          (e) Subject only to the provisions of Sections 9.1 and 7.2, until
Horizon has completed its Initial Contribution, and if Horizon has elected to
fund Additional Contribution(s) under Subsections 5.3(a) and (b) then for so
long thereafter as Horizon bears all Qualifying Expenses for Operations, Horizon
shall have the sole right to determine the nature, timing, scope, extent and
method of all Operations without obtaining the approval or consent of Canyon or
the Management Committee. In conducting such Operations, Horizon shall exercise
the standard of care set forth in Section 8.3. Horizon has agreed to fulfill the
Manager’s monthly reporting requirements set forth in Section 8.2(o) beginning
as of the Effective Date. With the exception of Section 8.2(o), for so long as
Horizon bears all Qualifying Expenses for Operations, Horizon shall be entitled,
but shall not be obligated, to exercise any of the applicable powers of the
Manager in Section 8.2, except that until Horizon has completed its Initial
Contribution it shall not be entitled or required to perform the activities
described in Subsections 8.2(g), (i), (l) and (s) that would otherwise require
consent of the Management Committee or of

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Canyon. For all such Operations, Horizon shall provide for accrual of reasonably
anticipated Environmental Compliance expenses, which shall constitute Qualifying
Expenses, and upon completion of its Initial Contribution, Horizon shall
transfer any accrued but unexpended amounts to the Environmental Compliance Fund
established under Paragraph 2.14 of Exhibit B.
               (f) Canyon shall provide Horizon with written notice of any
exceptions it may have to the statement of Qualifying Expenses submitted to it
as provided above within three (3) months after receipt of the statement.
Failure to provide such notice within the three (3) month period shall
constitute acceptance by Canyon of the stated Qualifying Expenses, subject to
audit provisions of Section 10.6.
          5.2 Failure to Make Initial Contribution.
               (a) Horizon’s failure to make its Initial Contribution in
accordance with the provisions of this Article V, if not cured within thirty
(30) days after notice by Canyon of such default, shall be deemed to be a
withdrawal of Horizon from the Business, the termination of its Participating
Interest hereunder and a transfer of its Participating Interest and Capital
Account to Canyon. Upon such deemed withdrawal, Horizon shall have no further
right, title or interest in the Assets and it shall take such actions as are
necessary to ensure that all Assets are free and clear of any Encumbrances
arising by, through or under it, except for such Encumbrances to which the
Participants may have agreed. Subject to Subsection 5.2(b) below, Horizon’s
withdrawal shall be effective upon such failure, but such withdrawal shall not
relieve Horizon of its obligation to Canyon to fund Operations up to the amount
of Horizon’s contractual obligations to third parties, nor shall such withdrawal
relieve Horizon of its responsibility to fund and satisfy Horizon’s share of
liabilities to third persons (regardless of whether such liabilities accrue
before or after such withdrawal), including Environmental Liabilities,
Continuing Obligations and Environmental Compliance, arising prior to Horizon’s
withdrawal, which responsibility shall be based on Horizon’s initial
Participating Interest.
               (b) Notwithstanding Subsection 5.2(a) above, Horizon shall have
the right, within ninety (90) days after the Effective Date, to conduct an
investigation and perform a baseline assessment of the environmental conditions
of the Properties including sampling and analyses as Horizon deems advisable.
Upon completion of such baseline assessment, Horizon shall promptly provide the
report and any analytical results to Canyon. If Horizon determines that
conditions may exist on the Properties which may, in Horizon’s judgment, result
in violation of Environmental Laws, Horizon shall have the right to withdraw
from the Business by giving written notice to Canyon of such withdrawal.
Horizon’s withdrawal shall be effective upon receipt by Canyon of such notice,
but such withdrawal shall not relieve Horizon of its obligation to fund
Operations up to the amount of Horizon’s agreed contribution to the Initial
Program and Budget. Such withdrawal shall, however, relieve Horizon of its
responsibility to fund and satisfy

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Horizon’s share of liabilities to third parties (regardless of whether such
liabilities accrue before or after such withdrawal), including Environmental
Liabilities, Continuing Obligations and Environmental Compliance, other than
those arising out of Operations conducted by Horizon after the Effective Date
and prior to its withdrawal. Horizon shall fund and satisfy one hundred percent
(100%) of such liabilities only until it has contributed the full amount of its
agreed contribution to the Initial Program and Budget. Except as provided in
this Subsection and except as may be otherwise expressly provided herein,
Horizon’s withdrawal shall relieve Horizon from any other obligation to make
contributions hereunder.
     5.3 Additional Contribution(s). At such time as Horizon has contributed the
full amount of its Initial Contribution under Subsection
5.1(b), Horizon may elect to increase its Participating Interest by funding one
or both Additional Contribution(s) described in Subsections 5.3(a) and(b) below.
          (a) Horizon may elect, at its sole discretion, by advance notice to
Canyon within forty-five (45) days prior to the completion of its Initial
Contribution, to solely fund the next One Million Dollars ($1,000,000) of
Operations within the two (2) year period following completion of the funding of
its Initial Contribution and thereby earn an additional twenty percent (20%)
Participating Interest. During this period of sole funding by Horizon, Canyon
shall have no obligation to fund its pro rata share of expenditures and Horizon
shall have the sole right and control over Operations consistent with Subsection
5.1(e). Upon completion of Horizon’s Additional Contribution described within
this Subsection, One Million Dollars ($1,000,000) shall be credited to Horizon’s
Equity Account, Horizon’s Participating Interest shall be increased by twenty
percent (20%) to a total of seventy percent (70%), and Canyon’s Participating
Interest shall be decreased by twenty percent (20%) to a total of thirty percent
(30%).
          (b) Horizon may elect, at its sole discretion and by advance notice to
Canyon within forty-five (45) days prior to the completion of its funding of the
second One Million Dollar ($1,000,000) contribution described in Subsection
5.3(a), to acquire an additional twenty percent (20%) Participating Interest, by
funding a Feasibility Study prepared by a Feasibility Contractor and thereby
earning an additional five percent (5%) Participating Interest, for a total of
seventy-five percent (75%) Participating Interest at the time the Feasibility
Study is completed and paid for. If Horizon elects to fund a Feasibility Study
prepared by a Feasibility Contractor, Horizon shall proceed with reasonable
diligence to complete the same within a reasonable time following completion of
Horizon’s funding of the second One Million Dollar ($1,000,000) contribution.
During this period of sole funding by Horizon, Canyon shall have no obligation
to fund its pro rata share of expenditures and Horizon shall have the sole right
and control over Operations consistent with Subsection 5.1(e). Upon completion
of such funding, an amount equal to the cost of such Feasibility Study shall be
credited to Horizon’s Equity Account, Horizon’s Participating Interest shall be
increased by five percent (5%) to a total of seventy-five

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percent (75%), and Canyon’s Participating Interest shall be decreased by five
percent (5%) to a total of twenty-five percent (25%).
          (c) Upon the Management Committee’s decision to construct a Mining
facility based on the Feasibility Study and subject to applicable securities
laws and regulations, Horizon shall tender to Canyon either the number of common
shares of Horizon equal in value to Two Million Dollars ($2,000,000) if at that
date Horizon is a publicly traded company, or a payment of Two Million Dollars
($2,000,000) if Horizon is not a publicly traded company. The price to be used
for the determination of the number of such shares to be transferred to Canyon
shall be consistent with the pricing mechanism set forth in Subsections
5.1(d)(i) and (ii).
          (d) If Horizon does not elect to increase its initial Participating
Interest pursuant to Subsections 5.3(a) and (b), the Participants, subject to
any election permitted by Subsection 9.5(a), shall be obligated to contribute
funds to adopted Programs and Budgets in proportion to their respective initial
Participating Interests set forth in Section 6.1.
ARTICLE VI
INTERESTS OF PARTICIPANTS
     6.1 Initial Participating Interests. Horizon’s initial Participating
Interest set forth below shall become effective immediately once Horizon has
fulfilled its Initial Contribution obligations set forth in Section 5.1. Once
Horizon has earned its initial Participating Interest, the Participants shall
have the following Participating Interests:

         
Canyon
    50 %
Horizon
    50 %

     6.2 Changes in Participating Interests. The Participating Interests shall
be eliminated or changed as follows:
          (a) Upon withdrawal or deemed withdrawal as provided in Sections 5.2,
6.3, and Article XII;
          (b) Upon an election by a Participant pursuant to Section 9.5 to
contribute more or less to an adopted Program and Budget than the percentage
equal to its Participating Interest, or to contribute nothing to an adopted
Program and Budget;
          (c) In the event of default by either Participant in making its
agreed-upon contribution to an adopted Program and Budget, followed by an
election by the other Participant to invoke any of the remedies in Section 10.5;

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          (d) Upon Transfer by either Participant of part or all of its
Participating Interest in accordance with Article XVI; or
          (e) Upon acquisition by either Participant of part or all of the
Participating Interest of the other Participant, including any elections by
Horizon to increase its Participating Interest by completing Additional
Contribution(s) in accordance with Section 5.3.
     6.3 Elimination of Minority Interest.
          (a) At such time as a Reduced Participant’s Recalculated Participating
Interest drops to less than fifteen percent (15%), its Recalculated
Participating Interest shall automatically be converted to a three percent (3%)
production royalty as calculated in accordance with Exhibit E (“Production
Royalty”). Once converted to a Production Royalty, the Reduced Participant shall
be deemed to have relinquished its entire Participating Interest free and clear
of any Encumbrances arising by, through or under the Reduced Participant, except
any such Encumbrances listed in Paragraph 1.1 of Exhibit A or to which the
Participants have agreed. Such relinquished Participating Interest shall be
deemed to have accrued automatically to the other Participant. The Reduced
Participant’s Capital Account shall be transferred to the remaining Participant.
Upon conversion of its Recalculated Participating Interest to the Production
Royalty, and subject to Section 6.4, the Reduced Participant shall thereafter
have no other further right, title, or interest in the Assets or under this
Agreement, and the tax partnership established by Exhibit C shall dissolve
pursuant to Paragraph 4.2 of Exhibit C. In such event, the Reduced Participant
shall execute and deliver an appropriate conveyance of all of its right, title
and interest in the Assets to the remaining Participant in consideration of the
other Participant’s execution and delivery of a royalty deed conveying the
Production Royalty.
          (b) The relinquishment, withdrawal and entitlements for which this
Section provides shall be effective as of the effective date of the
recalculation under Sections 9.5 or 10.5. However, if the final adjustment
provided under Section 9.6 for any recalculation under Section 9.5 results in a
Recalculated Participating Interest of fifteen percent (15%) or more: (i) the
Recalculated Participating Interest shall be deemed, effective retroactively as
of the first day of the Program Period, to have automatically revested; (ii) the
Reduced Participant shall be reinstated a Participant, with all of the rights
and obligations pertaining thereto; (iii) the right to the Production Royalty
under Subsection 6.3(a) shall terminate; and (iv) the Manager, on behalf of the
Participants, shall make any necessary reimbursements, reallocations of
Products, contributions and other adjustments as provided in Subsection 9.6(d).
Similarly if such final adjustment under Section 9.6 results in a Recalculated
Participating interest of less than fifteen percent (15%) for a Program Period
as to which the provisional calculation under Section 9.5 had not resulted

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in a Participating Interest of less than fifteen percent (15%), then such
Participant, 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 Participating Interest of fifteen percent (15%). If no
such election is made, such Participant shall be deemed to have withdrawn under
the terms of Subsection 6.3(a) as of the beginning of such Program Period, and
the Manager, on behalf of the Participants, shall make any necessary
reimbursements, reallocations of Products, contributions, and other adjustments
as provided in Subsection 9.6(d), to which such Participant may be entitled for
such Program Period.
     6.4 Continuing Liabilities Upon Adjustments of Participating Interests. Any
reduction or conversion of either Participant’s Participating Interest under
Section 6.2 shall not relieve such Participant of its share of any liability,
including, without limitation, Continuing Obligations, Environmental Liabilities
and Environmental Compliance, whether arising, before or after such reduction or
conversion, out of acts or omissions occurring or conditions existing prior to
the Effective Date or out of Operations conducted during the term of this
Agreement but prior to such reduction or conversion, regardless of when any
funds may be expended to satisfy such liability. For purposes of this Section,
such Participant’s share of such liability shall be equal to its Participating
Interest at the time the act or omission giving rise to the liability occurred
after first taking into account any reduction, readjustment and restoration of
Participating Interests under Sections 6.3, 9.5, 9.6 and 10.5 (or, as to such
liability arising out of acts or omissions occurring or conditions existing
prior to the Effective Date, equal to such Participant’s initial Participating
Interest). Should the cumulative cost of satisfying Continuing Obligations be in
excess of cumulative amounts accrued or otherwise charged to the Environmental
Compliance Fund as described in Exhibit B, each of the Participants shall be
liable for its proportionate share (i.e., Participating Interest 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 Participating
Interests under Sections 6.3, 9.5, 9.6 and 10.5, of the cost of satisfying such
Continuing Obligations, notwithstanding that either Participant has previously
withdrawn from the Business or that its Participating Interest has been reduced
or converted to a Production Royalty pursuant to Subsection 6.3(a).
     6.5 Documentation of Adjustments to Participating Interests. Adjustments to
the Participating Interests need not be evidenced during the term of this
Agreement by the execution and recording of appropriate instruments, but each
Participant’s Participating Interest and related Equity Account balance shall be
shown in the accounting records of the Manager, and any adjustments thereto,
including any reduction, readjustment, and restoration of Participating
Interests under Sections 9.5, 9.6 and 10.5, shall be made monthly. However,
either Participant, at any time upon the request of the other Participant, shall
execute and acknowledge instruments necessary to evidence such adjustments in
form sufficient for filing and recording in the jurisdiction where the
Properties are located.

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     6.6 Grant of Lien and Security Interest.
          (a) Subject to Section 6.7, each Participant grants to the other
Participant a lien upon and a security interest in its Participating Interest,
including all of its right, title and interest in the Assets, whenever acquired
or arising, and the proceeds from and accessions to the foregoing.
          (b) The liens and security interests granted by Subsection 6.6(a)
shall secure every obligation or liability of the Participant granting such lien
or security interest created under this Agreement, including the obligation to
repay a Cover Payment in accordance with Section 10.4. Each Participant hereby
agrees to take all action necessary to perfect such lien and security interest
and hereby appoints the other Participant its attorney-in-fact to execute, file
and record all financing statements and other documents necessary to perfect or
maintain such lien and security interest.
     6.7 Subordination of Interests. Each Participant shall, from time to time,
take all necessary actions, including execution of appropriate agreements, to
pledge and subordinate its Participating Interest, any liens it may hold which
are created under this Agreement including those created pursuant to Section 6.6
hereof, and any other right or interest it holds with respect to the Assets
(other than any statutory lien of the Manager) to any secured borrowings for
Operations approved by the Management Committee, including any secured
borrowings relating to Project Financing, and any modifications or renewals
thereof.
ARTICLE VII
MANAGEMENT COMMITTEE
     7.1 Organization and Composition. The Participants hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under this Agreement. The Management Committee shall consist
of an equal number of member(s) appointed by Canyon and Horizon. Each
Participant may appoint one or more alternates to act in the absence of a
regular member. A Participant shall have at least one member until such time as
its Participating Interest is converted to a Production Royalty pursuant to
Section 6.3. Appointments by a Participant shall be made or changed by notice to
the other members.
     7.2 Decisions. After Horizon has completed the funding of its Initial
Contribution, each Participant, acting through its appointed member(s) in
attendance at the meeting, shall have the votes on the Management Committee in
proportion to its Participating Interest. Except for
super-majority voting matters identified herein or as otherwise provided in this
Agreement, the vote of the Participant with a Participating

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Interest greater than fifty percent (50%) shall determine the decisions of the
Management Committee. Unanimous consent of the Participants shall be required
for the following matters designated as super-majority voting matters: (i) the
sale or other disposition of Assets in accordance with Section 8.2(i) and
Article XIV; (ii) the initiation of litigation against third parties in
accordance with Section 8.2(g); (iii) liquidation or wind-up of the Business
except in accordance with Article XII; (iv) changes to the Administrative Charge
provided for in Exhibit B in accordance with Section 8.5; (v) disbursements from
the Business Account or other distributions to the Manager except disbursements
due the Manager Participant from its share of Products, other distributions made
to all Participants, or otherwise as authorized by this Agreement; and
(vi) disbursements from the Environmental Compliance Fund for any purpose other
than ongoing Environmental Compliance conducted during Operations, mine closure,
post-Operations Environmental Compliance or Continuing Obligations.
     7.3 Meetings.
          (a) Beginning as of the Effective Date, the Management Committee shall
hold regular meetings at least quarterly in Golden, Colorado, or at other agreed
places. The Manager shall give fourteen (14) days notice to the Participants of
such meetings. Additionally, either Participant may call a special meeting upon
seven (7) days notice to the other Participant. In case of an emergency,
reasonable notice of a special meeting shall suffice. There shall be a quorum if
at least one member representing each Participant is present; provided, however,
that if a Participant fails to attend two consecutive properly called meetings,
then a quorum shall exist at the second meeting if the other Participant is
represented by at least one appointed member, and a vote of such Participant
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.
          (b) If business cannot be conducted at a regular or special meeting
due to the lack of a quorum, either Participant may call the next meeting upon
thirty (30) days notice to the other Participant.
          (c) Each notice of a meeting shall include an itemized agenda prepared
by the Manager in the case of a regular meeting or by the Participant calling
the meeting in the case of a special meeting, but either Participant may add
matters to the agenda at least three (3) days before the meeting or with the
consent of the other Participant. The Manager shall prepare and distribute
minutes of all meetings to the other Participant within fifteen (15) days after
the meeting. Either Participant may electronically record the proceedings of a
meeting with the consent of the other Participant. The other Participant shall
sign and return or object to the minutes prepared by the Manager within thirty
(30) days after receipt, and failure to do either shall be deemed acceptance of
the minutes as prepared by the Manager. The minutes, when signed or deemed
accepted by both Participants, shall be the official record of the decisions
made by the Management

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Committee. Decisions made at a Management Committee meeting shall be implemented
in accordance with adopted Programs and Budgets. If a Participant timely objects
to minutes proposed by the Manager, the members of the Management Committee
shall seek, for a period not to exceed thirty (30) days from receipt by the
Manager of notice of the objections, to agree upon minutes acceptable to both
Participants. 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 Manager together with the other Participant’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
Participants individually.
     7.4 Action Without Meeting in Person. In lieu of meetings in person, the
Management Committee may conduct meetings by telephone or video conference, so
long as minutes of such meetings are prepared in accordance with Subsection
7.3(c). The Management Committee may also take actions in writing signed by all
members.
     7.5 Matters Requiring Approval. Except as provided in Subsection 5.1(e) and
as otherwise delegated to the Manager in Section 8.2, the Management Committee,
acting in accordance with Section 7.2, shall have exclusive authority to
determine all matters related to overall policies, objectives, procedures,
methods and actions under this Agreement.
ARTICLE VIII
MANAGER
     8.1 Appointment. The Participants hereby appoint Horizon as the initial
Manager with overall management responsibility for Operations. Horizon hereby
agrees to serve until it resigns or has been deemed to resign as provided in
Section 8.4. The Participants agree that notwithstanding Horizon’s appointment
as Manager, for up to one (1) year from the Effective Date, Canyon shall
continue to maintain all mining claims and lease rights and take all other
actions to maintain the Properties until Horizon expressly assumes this
responsibility. Horizon shall promptly reimburse expenses directly incurred by
Canyon to maintain the Properties following receipt of invoice and reasonable
supporting documentation.
     8.2 Powers and Duties of Manager. Subject to the terms and provisions of
this Agreement, the Manager shall have the following powers and duties, which
shall be discharged in accordance with adopted Programs and Budgets.
          (a) 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 IX.

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          (b) The Manager shall implement the decisions of the Management
Committee, shall 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.
          (c) The Manager shall use reasonable efforts to: (i) purchase or
otherwise acquire all material, supplies, equipment, water, utility and
transportation services required for Operations, such purchases and acquisitions
to be made to the extent reasonably possible on the best terms available, taking
into account all of the circumstances; (ii) obtain such customary warranties and
guarantees as are available in connection with such purchases and acquisitions;
and (iii) keep the Assets free and clear of all Encumbrances, except any such
Encumbrances listed in Paragraph 1.1 of Exhibit A 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. The Manager shall use its best efforts to obtain bids from multiple
third party suppliers for individual, or related aggregate, purchases or
purchase commitments that exceed Fifty Thousand Dollars ($50,000).
          (d) The Manager 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.
          (e) Except as to be performed by Canyon under Section 8.1, the Manager
shall: (i) make or arrange for all payments required by leases, licenses,
permits, contracts and other agreements with third parties related to the
Assets; (ii) pay all taxes, assessments and like charges on Operations and
Assets except taxes determined or measured by a Participant’s sales revenue or
net income, and shall otherwise promptly pay and discharge expenses incurred in
Operations; provided, however, that the Manager shall have the right to contest
(in the courts or otherwise) the validity or amount of any taxes, assessments or
charges or take other reasonable steps or proceedings to seek a reduction or
readjustment prior to payment 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 (iii) do all other acts reasonably necessary to
maintain the Assets.
          (f) The Manager shall: (i) apply for all necessary permits, licenses
and approvals; (ii) comply with all Laws; (iii) notify promptly the Management
Committee of any actual or alleged substantial violations thereof; and
(iv) maintain records and 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 8.3. In the
event of any such violation, the Manager shall timely cure or dispose of such

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violation on behalf of both Participants through performance, payment of fines
and penalties, or both, and the cost thereof shall be charged to the Business
Account.
          (g) The Manager shall prosecute and defend, but shall not initiate
without unanimous consent of the Participants in accordance with Section 7.2,
all litigation against third parties or administrative proceedings arising out
of Operations. The non-managing Participant shall have the right to participate,
at its own expense, in such litigation or administrative proceedings. The
non-managing Participant shall approve in advance any settlement involving
payments, commitments or obligations in excess of Fifty Thousand Dollars
($50,000) in cash or value.
          (h) The Manager shall provide insurance for the benefit of the
Participants as follows or as may otherwise be determined from time to time by
the Management Committee. The Manager shall, at all times while conducting
Operations, comply fully with the applicable worker’s compensation laws and
purchase, or provide protection for the Participants comparable to that provided
under standard form insurance policies for the following risk categories:
(i) comprehensive general liability and property damage with combined limits of
not less than Two Million Dollars ($2,000,000) for bodily injury and property
damage; (ii) automobile insurance with combined limits of not less than One
Million Dollars ($1,000,000); and (iii) adequate and reasonable insurance
against risk of fire and other risks ordinarily insured against in similar
operations. Insurance coverage and limits shall be subject to annual review and
approval by the Management Committee. Each Participant shall self-insure or
purchase for its own account such additional insurance as it deems necessary.
          (i) Except as expressly authorized in Article XII, unanimous consent
of both Participants in accordance with Section 7.2 is required before the
Manager may: (i) abandon or surrender Properties as provided in Article XIV;
(ii) 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);
(iii) begin a liquidation or initiate wind up of the Business; or (iv) dispose
of Assets necessary to achieve the purposes of the Business.
          (j) The Manager shall have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent contractors subject to
Section 8.6 and prior disclosure to the Management Committee of the scope of
responsibilities to be carried out by agents, Affiliates or independent
contractors.
          (k) Except as to be performed by Canyon under Section 8.1, the Manager
shall perform or cause to be performed all assessment and other work, and shall
pay all Governmental Fees required by Law in order to maintain the unpatented
mining claims, mill sites and tunnel sites included within the Properties. The
Manager shall have the right to perform the assessment work required hereunder
pursuant to a common plan of exploration and continued actual occupancy of such
claims and sites shall not be

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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 pursuant to an adopted Program and Budget and is performed in accordance with
the Manager’s standard of care under Section 8.3. The Manager shall 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 and sites, in each case in
sufficient detail to reflect compliance with the requirements applicable to each
claim and site. The Manager shall not be liable on account of 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 8.3.
          (l) If authorized by the Management Committee, the Manager may:
(i) locate, amend or relocate any unpatented mining claim or mill site or tunnel
site, (ii) locate any fractions resulting from such amendment or relocation,
(iii) apply for patents or mining leases or other forms of mineral tenure for
any such unpatented claims or sites, (iv) 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, (v) 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, (vi) 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 (vii) convert any
unpatented claims or mill sites into one or more leases or other forms of
mineral tenure pursuant to any Law hereafter enacted.
          (m) The Manager shall keep and maintain all required accounting and
financial records pursuant to the procedures described in Exhibit B and in
accordance with generally accepted accounting principles used by companies based
in the United States (“US GAAP”) as further described in Exhibit B, and shall
ensure appropriate separation of accounts unless otherwise agreed by the
Participants.
          (n) The Manager shall maintain Equity Accounts for each Participant.
Each Participant’s Equity Account shall be credited with the value of such
Participant’s contributions under Subsections 5.1(a), 5.1(b), 5.3(a), and 5.3(b)
and shall be credited with amounts contributed by such Participant under
Subsection 5.3(d). Each Participant’s Equity Account shall be charged with the
cash and the fair market value of property distributed to such Participant (net
of liabilities assumed by such Participant 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. Solely for purposes of
determining

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the Equity Account balances of the Participants, the Manager shall reasonably
estimate the fair market value of all Products distributed to the Participants,
and such estimated value shall be used regardless of the actual amount received
by each Participant upon disposition of such Products.
          (o) Subject to Section 8.3, the Manager shall keep the Management
Committee advised of all Operations by submitting in writing to the members of
the Management Committee: (i) monthly progress reports that include statements
of expenditures and comparisons of such expenditures to the adopted Budget;
(ii) periodic summaries of data acquired; (iii) copies of reports concerning
Operations; (iv) a detailed final report within sixty (60) 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 (v) such other reports as any member of the Management Committee
may reasonably request. Subject to Article XVIII, at all reasonable times and
upon reasonable advance notice the Manager shall provide the Management
Committee, or other authorized representative of a Participant access to, and
the right to inspect and, at such Participant’s cost and expense, copies of the
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, in the
possession of the Manager, subject to Article XVIII. In addition, the Manager
shall allow authorized representatives of the non-managing Participant, at the
latter’s sole risk, cost and expense, and subject to reasonable safety
regulations, to inspect the Assets and Operations at all reasonable times and
upon reasonable advance notice, so long as the representative does not
unreasonably interfere with Operations.
          (p) The Manager shall prepare an Environmental Compliance plan for all
Operations consistent with 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.
          (q) The Manager shall undertake Continuing Obligations when and as
economic and appropriate, whether before or after termination of the Business.
As part of each Program and Budget submittal, the Manager shall specify the
measures to be taken for performance of Continuing Obligations and the cost of
such measures and shall describe the Manager’s efforts to discharge Continuing
Obligations. Authorized representatives of each Participant upon reasonable
advance notice shall have the right from time to time to enter the Properties to
inspect work directed toward satisfaction of Continuing Obligations and audit
books, records, and accounts related thereto.

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          (r) The Environmental Compliance Fund shall be maintained by the
Manager as a separate, interest bearing cash management account, which may
include, but is not limited to, money market investments 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 meet financial assurance obligations for the reclamation or
restoration of the Properties, and for other Environmental Compliance
requirements.
          (s) If Participating Interests are adjusted in accordance with this
Agreement the Manager shall propose from time to time one or more methods for
fair pro rata allocation of costs for Continuing Obligations.
          (t) The Manager shall 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 Section 7.1.
     8.3 Standard of Care. The Manager shall discharge its duties under
Section 8.2 and conduct all Operations in a good, workmanlike and efficient
manner, in accordance with sound mining and other 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. Without limiting the generality of the foregoing, all statements,
reports or compilations of factual, financial or other data, and summaries of
such data presented by Manager to the Management Committee shall be prepared to
at least the level of detail, care and attention as those statements, reports or
compilations prepared by the Manager Participant for its own use. The Manager
shall not be liable to the other Participant 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 under Section 8.2 if its inability or failure to
perform results from the failure of the other Participant to perform acts or to
contribute amounts required of it by this Agreement.
     8.4 Resignation; Deemed Offer to Resign. The Manager may resign upon not
less than six (6) months’ prior notice to the other Participant, in which case
the other Participant may elect to become the new Manager by notice to the
resigning Participant within sixty (60) days after receipt of the notice of
resignation. The Manager shall be deemed to have resigned upon the occurrence of
the event described in each of the following Subsections, with the other
Participant to appoint itself or a third party as the successor Manager at a
subsequently called meeting of the Management Committee, at which the Manager
shall not be entitled to vote.
          (a) The aggregate Participating Interest of the other Participant and
its Affiliates becomes greater than fifty percent (50%);

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          (b) Except for conditions of Force Majeure, the Manager fails to
perform a material obligation imposed upon it under this Agreement and such
failure continues for a period of sixty (60) days after notice from the other
Participant demanding performance;
          (c) The Manager fails to pay or contest in good faith its bills and
Business debts as such obligations become due;
          (d) 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 in by the Manager;
          (e) The Manager commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or consents to
the entry of an order for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any substantial
part of its assets; or makes a general assignment for the benefit of creditors;
or takes corporate or other action in furtherance of any of the foregoing; or
          (f) 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 Participating Interest or its other assets by a court of competent
jurisdiction in an involuntary case commenced under any applicable bankruptcy,
insolvency or other similar law of any jurisdiction now or hereafter in effect.
Under Subsections (d), (e) or (f) above, the appointment of a successor Manager
shall be deemed to pre-date the event causing a deemed resignation.
     8.5 Payments To Manager. The Manager shall be compensated for its services
and reimbursed for its costs hereunder in accordance with Exhibit B. Unanimous
consent of both Participants is required to increase the Administrative Charge,
described in Paragraph 2.13 of Exhibit B, due Manager under this Agreement.
Except as specifically set out in this Agreement including Exhibit B or agreed
to by unanimous consent of both Participants, the Manager may not collect
additional costs, expenses, fees, charges, or other disbursements from the
Business Account.
     8.6 Transactions With Affiliates. If the Manager engages Affiliates to
provide services hereunder, it shall do so on terms no less favorable than would
be the case in arm’s-length transactions with unrelated persons.

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     8.7 Activities During Deadlock. If the Management Committee for any reason
fails to adopt a proposed Program or Budget, the Manager shall continue
Operations at levels sufficient to maintain the then current Operations and
Properties. Additionally, if Mining has already been established, the Manager
shall continue Mining Operations at a level comparable with the last adopted
Mining Program and Budget exclusive of capital items. All of the foregoing shall
be subject to the contrary direction of the Management Committee and the receipt
of necessary funds.
ARTICLE IX
PROGRAMS AND BUDGETS
     9.1 Initial Program and Budget. The Initial Program and Budget to which
both Participants have agreed is hereby adopted and is attached as Exhibit F.
     9.2 Operations Pursuant to Programs and Budgets. Except as otherwise
provided in Subsection 5.1(e), Section 9.13, and Article XIII, 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 cash accrual of reasonably
anticipated Environmental Compliance expenses for all Operations contemplated
under the Program and Budget in accordance with Paragraph 2.14 of Exhibit B.
     9.3 Presentation of Programs and Budgets. Proposed Programs and Budgets
shall be prepared by the Manager to encompass a period of one (1) year or any
other period and broken out by quarterly periods as approved by the Management
Committee, and shall be submitted to the Management Committee for review and
consideration. All proposed Programs and Budgets may include Exploration,
Pre-Feasibility Studies, Feasibility Study, Development, Mining and Expansion or
Modification Operations components, or any combination thereof, and shall be
reviewed and adopted upon a vote of the Management Committee in accordance with
Sections 7.2 and 9.4. Each Program and Budget adopted by the Management
Committee, shall be reviewed quarterly at a meeting of the Management Committee.
At least three (3) months prior to the expiration of the then current annual
Program and Budget, a proposed Program and Budget for the succeeding period
shall be submitted to the Management Committee for review and consideration.
     9.4 Review and Adoption of Proposed Programs and Budgets. A Participant
shall be deemed to have approved and voted to adopt a proposed Plan and Budget
unless it submits in writing to the Management Committee, within thirty
(30) days after receipt, its rejection of or proposed modification(s) to any or
all of the components of the proposed Plan and Budget. If a Participant timely
submits its rejection or proposed

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modification(s) to the Management Committee then the Manager working with the
other Participant shall seek for a period of time not to exceed twenty (20) days
to develop a complete Program and Budget acceptable to both Participants. The
Manager shall then call a Management Committee meeting in accordance with
Section 7.3 for purposes of reviewing and voting upon the proposed Program and
Budget.
     9.5 Election to Participate.
          (a) By notice to the Management Committee within twenty (20) days
after the final vote adopting a Program and Budget, and notwithstanding its vote
concerning adoption of a Program and Budget, a Participant may elect to
participate in the approved Program and Budget: (i) in proportion to its
respective Participating Interest, (ii) in some lesser amount than its
respective Participating Interest, (iii) not at all; or (iv) if a Reduced
Participant, some greater amount than its Recalculated Participating Interest
subject to Subsection 9.5(d). In case of an election under Subsection 9.5(a)(ii)
or (iii), its Participating Interest shall be recalculated as provided in
Subsection 9.5(b) below, with dilution effective as of the first day of the
Program Period for the adopted Program and Budget. If a Participant fails to so
notify the Management Committee of the extent to which it elects to participate,
the Participant shall be deemed to have elected to contribute to such Program
and Budget in proportion to its respective Participating Interest as of the
beginning of the Program Period.
          (b) If a Participant elects to contribute to an adopted Program and
Budget some lesser amount than in proportion to its respective Participating
Interest, or not at all, and the other Participant elects to fund all or any
portion of the deficiency, the Participating Interest of the Reduced Participant
shall be provisionally recalculated by dividing: (A) the sum of (1) the amount
credited to the Reduced Participant’s Equity Account with respect to its Initial
Contribution under Section 5.1, (2) the total of all of the Reduced
Participant’s contributions under Section 5.3, and (3) the amount, if any, the
Reduced Participant elects to contribute to the adopted Program and Budget; by
(B) the sum of (1), (2) and (3) above for both Participants; and then
multiplying the result by one hundred. The Participating Interest of the other
Participant shall be increased by the amount of the reduction in the
Participating Interest of the Reduced Participant, and if the other Participant
elects not to fund the entire deficiency, the Manager shall adjust the Program
and Budget to reflect the funds available.
          (c) Whenever the Participating Interests are recalculated pursuant to
this Section 9.5, (i) the Equity Accounts of both Participants shall be revised
to bear the same ratio to each other as their recalculated Participating
Interests; and (ii) the portion of Capital Account attributable to the reduced
Participating Interest of the Reduced Participant shall be transferred to the
other Participant.

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          (d) Until such time as a Reduced Participant’s Recalculated
Participating Interest drops to less than fifteen percent (15%) and is converted
to a Production Royalty in accordance with Section 6.3, a Reduced Participant
may elect to restore its diluted Participating Interest by participating in an
approved Program and Budget in an amount greater than in proportion to its
Recalculated Participating Interest. At such time as the Reduced Participant has
(i) funded its share of the current Program and Budget at least in proportion to
its current Recalculated Participating Interest, as well as (ii) contributed
funds to the Business Account equal to one hundred fifty percent (150%) or more
of the amount the Reduced Participant should have contributed to any prior
Program and Budget in order to maintain its Participating Interest in effect on
the first day of the Program Period for such Program and Budget, the Reduced
Participant’s Participating Interest shall be recalculated in accordance with
Subsection 9.5(b) and shall be effective in accordance with Subsection 9.6(d).
     9.6 Recalculation or Restoration of Reduced Interest Based on Actual
Expenditures.
          (a) If a Participant makes an election under Subsection 9.5(a)(ii) or
(iii), 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.
          (b) If the Manager expended or incurred obligations that were more or
less than the adopted Budget, the Participating Interests shall be recalculated
pursuant to Subsection 9.5(b) by substituting each Participant’s actual
contribution to the adopted Budget for that Participant’s estimated contribution
at the time of the Reduced Participant’s election under Subsection 9.5(a). Such
recalculation shall take into account any payments or contributions made by a
Reduced Participant pursuant to Subsection 9.5(d).
          (c) If the Manager expended or incurred obligations of less than
eighty percent (80%) of the adopted Budget, within twenty (20) days of receiving
the Manager’s report on expenditures, the Reduced Participant may reimburse the
other Participant for the difference between any amount contributed by the
Reduced Participant to such adopted Program and Budget and the Reduced
Participant’s proportionate share (at the Reduced Participant’s former
Participating Interest) of the actual amount expended or incurred for the
Program, plus interest on the difference accruing at the rate described in
Section 10.3 plus three (3) percentage points. Failure of the Reduced
Participant to timely reimburse shall result in dilution occurring in accordance
with this Article IX and shall bar the Reduced Participant from its rights under
this Subsection 9.6(c) concerning the relevant adopted Program and Budget.

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          (d) All recalculations under this Article IX shall be effective as of
the first day of the Program Period for the Program and Budget. The Manager, on
behalf of both Participants, shall make such adjustments so that, to the extent
possible, each Participant will be placed in the position it would have been in
had its Participating Interests as recalculated under this Section been in
effect as of the first day of the Program Period for such Program and Budget. If
the Participants are required to make contributions, reimbursements or other
adjustments pursuant to this Section, the Manager shall have the right to
purchase or sell a Participant’s share of Products in the same manner as under
Section 11.2 and to apply the proceeds of such sale to satisfy that
Participant’s obligation to make such contributions, reimbursements or
adjustments.
          (e) Whenever the Participating Interests are recalculated pursuant to
this Section, (i) the Participants’ Equity Accounts shall be revised to bear the
same ratio to each other as their Recalculated Participating Interests; and
(ii) the portion of Capital Account attributable to the reduced Participating
Interest of the Reduced Participant shall be transferred to the other
Participant.
     9.7 Pre-Feasibility Study Program and Budgets.
          (a) At such time as either Participant is of the good faith and
reasonable opinion that economically viable Mining Operations may be possible on
the Properties, the Participant may propose by written notice to the other
Participant that a Pre-Feasibility Study Program and Budget component be
prepared. Such proposal shall reference the data upon which the proposing
Participant bases its opinion, and shall call a meeting of the Management
Committee pursuant to Section 7.3. If such proposal is adopted by the Management
Committee, the Manager shall cause to have prepared a Pre- Feasibility Study
Program and Budget component as approved by the Management Committee and shall
submit the same to the Management Committee within thirty (30) days following
adoption of the proposal.
          (b) Pre-Feasibility Studies may be conducted by the Manager,
Feasibility Contractors, or both, or may be conducted by the Manager and audited
by Feasibility Contractors, as the Management Committee determines. A
Pre-Feasibility Study Program shall include the work approved in the proposal
adopted by the Management Committee, which may include some or all of the
following:
               (i) analyses of various alternatives for mining, processing and
treating of Products;
               (ii) analyses of alternative rates of mining, processing and
treating of Products;

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               (iii) analyses of alternative sites for placement of facilities
(i.e., water supply facilities, transport facilities, reagent storage, offices,
shops, warehouses, stock yards, explosives storage, handling facilities,
housing, public facilities);
               (iv) analyses of alternatives for waste treatment and handling
(including a description of each alternative of the method of tailings disposal
and the location of the proposed disposal site);
               (v) estimates of recoverable proven and probable reserves of
Products and of related substances, in terms of technical and economic
constraints (extraction and treatment of Products), including the effect of
grade, losses, and impurities, and the estimated mineral composition and content
thereof, and review of mining rates commensurate with such reserves;
               (vi) analyses of environmental impacts of the various
alternatives, including an analysis of the permitting, environmental liability
and other Environmental Law implications of each alternative, and costs of
Environmental Compliance for each alternative;
               (vii) tests to determine the efficiency of alternative
extraction, recovery and processing techniques, including an estimate of water,
power, and reagent consumption requirements;
               (viii) hydrologic studies related to any required use of water or
dewatering; and
               (ix) other studies and analyses approved by the Management
Committee.
          (c) If data results reasonably support a conclusion that further work
would be unwarranted for a particular alternative, the Manager shall have no
obligation to continue expenditures on other Pre-Feasibility Studies related
solely to such alternative.
     9.8 Completion of Pre-Feasibility Studies and Selection of Approved
Alternatives. As soon as reasonably practical following completion of all
Pre-Feasibility Studies required to evaluate fully the alternatives studied, the
Manager shall prepare a report summarizing all Pre-Feasibility Studies and shall
submit the same to the Management Committee. Such report shall incorporate the
following:
          (a) the results of the analyses of the alternatives and other matters
evaluated by the Pre-Feasibility Programs;

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          (b) reasonable estimates of capital costs for the Development and
start-up of the facilities required by the Development and Mining alternatives
evaluated (based on flowsheets, piping and instrumentation diagrams, and other
major engineering diagrams), which cost estimates shall include reasonable
estimates of:
               (i) capitalized pre-stripping expenditures, if an open pit or
surface mine is proposed;
               (ii) expenditures required to purchase, construct and install all
machinery, equipment and other facilities and infrastructure (including
contingencies) required to bring a mine into commercial production, including an
analysis of costs of equipment or supply contracts in lieu of Development costs
for each Development and Mining alternative evaluated;
               (iii) expenditures required to perform all other related work
required to commence commercial production of Products and, if applicable,
process Products (including reasonable estimates of working capital
requirements); and
               (iv) all other direct and indirect costs and general and
administrative expenses that may be required for a proper evaluation of the
Development and Mining alternatives and annual production levels evaluated. The
capital cost estimates shall include a schedule of the timing of the estimated
capital requirements for each alternative;
          (c) a reasonable estimate of the monthly expenditures required for the
first year of Operations after completion of the capital program described in
Subsection 9.8(b) for each Development alternative evaluated, and for subsequent
quarters of Operations, including estimates of annual production, processing,
administrative, operating and maintenance expenditures, taxes (other than income
taxes), working capital requirements, royalty and purchase obligations,
equipment leasing or supply contract expenditures, work commitments,
Environmental Compliance costs, post- Operations Environmental Compliance and
Continuing Obligations funding requirements and all other anticipated costs of
such Operations. This analysis shall also include an estimate of the number of
workers required to conduct such Operations for each alternative;
          (d) a review of the nature, extent and rated capacity of the mine,
machinery, equipment and other facilities preliminarily estimated to be required
for the purpose of producing and marketing Products under each Development and
Mining alternative analyzed;
          (e) an analysis (and sensitivity analyses reasonably requested by
either Participant), based on various target rates of return and price
assumptions requested

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by either Participant, of whether it is technically, environmentally, and
economically feasible to place a prospective ore body or deposit within the
Properties into commercial production for each of the Development and Mining
alternatives analyzed (including a discounted cash flow rate of return
investment analysis for each alternative and net present value estimate using
various discount rates requested by either Participant); and
          (f) such other information as the Management Committee deems
appropriate.
Within sixty (60) days after delivery of the Pre-Feasibility Study summary to
the Participants, a Management Committee meeting shall be convened for the
purposes of reviewing the Pre-Feasibility Study summary and selecting one or
more Approved Alternatives, if any.
     9.9 Programs and Budgets for Feasibility Study. Within ninety (90) days
following the selection of an Approved Alternative, the Manager shall submit to
the Management Committee a Program and a Budget component, which shall include
necessary Operations, for the preparation of a Feasibility Study. A Feasibility
Study shall be prepared by Feasibility Contractors.
     9.10 Development Programs and Budgets; Project Financing.
          (a) Unless otherwise determined by the Management Committee, the
Manager shall not submit to the Management Committee a Program and Budget
component including Development of the mine described in a completed Feasibility
Study until ninety (90) days following the receipt by Manager of a favorable
Feasibility Study. The Program and Budget, which includes Development of the
mine described in the completed Feasibility Study, shall be based on the
estimated cost of Development described in the Feasibility Study for the
Approved Alternative, unless otherwise directed by the Management Committee.
          (b) Promptly following adoption of the Program and Budget, which
includes Development as described in a completed Feasibility Study the Manager
shall submit to the Management Committee a report on material bids received for
Development work (“Bid Report”). If bids described in the Bid Report result in
the aggregate cost of Development work exceeding one hundred twenty percent
(120%) of the Development cost estimates that formed the basis of the
Development component of the adopted Program and Budget, the Program and Budget,
which includes relevant Development, shall be deemed to have been resubmitted to
the Management Committee based on the aggregate costs as described in the Bid
Report on the date of receipt of the Bid Report and shall be reviewed and
adopted in accordance with Sections 7.2 and 9.4.

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          (c) If the Management Committee approves the Development of the mine
described in a Feasibility Study and also decides to seek Project Financing for
such mine, each Participant shall, at its own cost, cooperate in seeking to
obtain Project Financing for such mine; provided, however, that all fees,
charges and costs (including attorneys and technical consultants fees) paid to
the Project Financing lenders shall be borne by the Participants in proportion
to their Participating Interests, unless such fees are capitalized as a part of
the Project Financing.
     9.11 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 Manager, Feasibility Contractors, or both, or
prepared by the Manager and audited by Feasibility Contractors, as the
Management Committee determines. The Program and Budget, which include Expansion
or Modification, shall be submitted for review and approval by the Management
Committee within ninety (90) days following receipt by the Manager of such
Feasibility Study.
     9.12 Budget Overruns; Program Changes. For Programs and Budgets adopted
after completion of Horizon’s Initial Contribution, the Manager shall
immediately notify the Management Committee of any material departure from an
adopted Program and Budget. If the Manager exceeds an adopted Budget by more
than twenty percent (20%) in the aggregate, then the excess over ten percent
(10%), except to the extent caused by a Force Majeure condition, emergency or
unexpected expenditure made pursuant to Section 9.13 or unless otherwise
authorized or ratified by the Management Committee, shall be for the sole
account of the Manager and such excess shall not be included in the calculations
of the Participating Interests nor deemed a contribution under this Agreement.
Budget overruns of twenty percent (20%) or less in the aggregate shall be borne
by the Participants in proportion to their respective Participating Interests.
     9.13 Emergency or Unexpected Expenditures. In case of emergency, the
Manager may take any reasonable action it deems necessary to protect life or
property, to protect the Assets or to comply with Laws. The Manager may make
reasonable expenditures on behalf of the Participants for unexpected events that
are beyond its reasonable control and that do not result from a breach by it of
its standard of care. The Manager shall promptly notify the Participants of the
emergency or unexpected expenditure, and the Manager shall be reimbursed for all
resulting costs by the Participants in proportion to their respective
Participating Interests.

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ARTICLE X
ACCOUNTS AND SETTLEMENTS
     10.1 Monthly Statements. The 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 in accordance with Section 8.3.
     10.2 Cash Calls. Following Horizon’s Initial Contribution under Subsection
5.1(b) and any Additional Contribution(s) it elects under Section 5.3, on the
basis of each adopted Program and Budget, the Manager shall submit 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, or a billing made
pursuant to Section 9.13 or 12.4, each Participant shall advance its
proportionate share of such cash requirements. The Manager shall record all
funds received in the Business Account. All funds received from a Participant in
excess of the Participant’s pro rata cash requirement or other funding
commitment under this Agreement, or in excess of actual Program expenditures
shall be credited towards the Participant’s future pro rata cash requirement or
other funding commitment. The Manager shall at all times maintain a cash balance
approximately equal to the rate of disbursement for up to ninety (90) days. All
funds in excess of immediate cash requirements shall be invested by the Manager
for the benefit of the Business in cash management accounts and investments
selected at the discretion of the Manager, which accounts may include, but are
not limited to, money market investments and money market funds.
     10.3 Failure to Meet Cash Calls. A Participant that fails to meet cash
calls in the amount and at the times specified in Section 10.2 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 Participant, but shall not be deemed as amounts contributed by
the non-defaulting Participant in the event dilution occurs in accordance with
Article VI. In addition to any other rights and remedies available to it by Law,
the non-defaulting Participant shall have those other rights, remedies, and
elections specified in Sections 10.4 and 10.5.
     10.4 Cover Payment. If a Participant defaults in making a contribution or
cash call required by an adopted Program and Budget, the non-defaulting
Participant may, but shall not be obligated to, advance some portion or all of
the amount in default on behalf of the defaulting Participant (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 10.3. If
more than one Cover Payment is made, the Cover Payments shall be aggregated and
the rights and remedies described herein pertaining to an

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individual Cover Payment shall apply to the aggregated Cover Payments. The
failure to repay such loan upon demand shall be a default.
     10.5 Remedies. The Participants acknowledge that if either Participant
defaults in making a contribution required by Article V or a cash call, or in
repaying a loan, as required under Sections 10.2, 10.3 or 10.4, whether or not a
Cover Payment is made, it will be difficult to measure the damages resulting
from such default (it being hereby understood and agreed that the Participants
have attempted to determine such damages in advance and determined that the
calculation of such damages cannot be ascertained with reasonable certainty).
Both Participants acknowledge and recognize that the damage to the
non-defaulting Participant could be significant. In the event of such default,
as reasonable liquidated damages, the non-defaulting Participant may, with
respect to any such default not cured within thirty (30) days after notice to
the defaulting Participant of such default, elect any of the following remedies
by giving notice to the defaulting Participant. 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 10.2.
          (a) The defaulting Participant grants to the non-defaulting
Participant a power of sale as to all or any portion of its interest in any
Assets or in its Participating Interest that is subject to the lien and security
interest granted in Section 6.6 (whether or not such lien and security interest
has been perfected), upon a default under Sections 10.3 or 10.4. 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
Participant elects to enforce the lien or security interest pursuant to the
terms of this Subsection, the defaulting Participant 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 Participant shall be liable for any deficiency.
          (b) The non-defaulting Participant may elect to have the defaulting
Participant’s Participating Interest diluted or eliminated. The Reduced
Participant’s Participating Interest shall be recalculated by dividing: (X) the
sum of (1) the value of the Reduced Participant’s Initial Contribution under
Section 5.1, (2) the total of all of the Reduced Participant’s contributions
under Section 5.3, and (3) the amount, if any, the Reduced Participant
contributed to the adopted Program and Budget with respect to which the default
occurred; by (Y) the sum of (1), (2) and (3) above for both Participants; and
then multiplying the result by one hundred. Dilution under this Subsection
10.5(b) shall be effective as of the date of the original default, and
Section 9.6 shall not apply. The amount of any Cover Payment under Section 10.4
and interest thereon, or any interest accrued in accordance with Section 10.3,
shall be deemed to be amounts contributed by the non-defaulting Participant, and
not as amounts contributed by the defaulting Participant.

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Whenever the Participating Interests are recalculated pursuant to this
Subsection 10.5(b), (A) the Equity Accounts of both Participants shall be
adjusted to bear the same ratio to each other as their recalculated
Participating Interests; and (B) the portion of Capital Account attributable to
the reduced Participating Interest of the Reduced Participant shall be
transferred to the other Participant.
     10.6 Audits.
          (a) After completion of Horizon’s Initial Contribution, within six
(6) months after the end of each calendar year, at the request of a Participant,
an audit shall be completed by certified public accountants who are independent
of the Manager and reasonably acceptable to both Participants. The audit shall
be conducted in accordance with generally accepted auditing standards and shall
cover all books and records maintained by the Manager 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,
together with all other matters customarily included in such audits. All written
exceptions to and claims upon the Manager for discrepancies disclosed by such
audit shall be made not more than three (3) months after receipt of the audit
report, unless either Participant elects to conduct an independent audit
pursuant to Subsection 10.6(b) 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 Subsection 10.6(b). Failure to make any such exception or
claim within such period shall mean the audit is deemed to be correct and
binding upon the Participants. The cost of all audits under this Subsection
shall be charged to the Business Account.
          (b) Notwithstanding the annual audit conducted by certified public
accountants selected by the Manager, each Participant shall have the right to
have an independent audit of all Business books, records and accounts, including
all charges to the Business Account. This audit shall review all issues raised
by the requesting Participant, with all costs borne by the requesting
Participant. The requesting Participant shall give the other Participant thirty
(30) days prior notice of such audit. Any audit conducted on behalf of either
Participant shall be made during the Manager’s normal business hours and shall
not interfere with Operations. Neither Participant shall have the right to audit
records and accounts of the Business 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 upon the Manager 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.

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ARTICLE XI
DISPOSITION OF PRODUCTION
     11.1 Taking In Kind. Each Participant shall take in kind or separately
dispose of its share of all Products in proportion to its Participating
Interest. Any extra expenditure incurred in the taking in kind or separate
disposition by either Participant of its proportionate share of Products shall
be borne by such Participant. Nothing in this Agreement shall be construed as
providing, directly or indirectly, for any joint or cooperative marketing or
selling of Products or permitting the processing of Products owned by any third
party at any processing facilities constructed by the Participants pursuant to
this Agreement. The Manager shall give notice in advance of the anticipated
delivery date upon which Products will be available. Each Participant agrees to
report promptly to the Manager the prices it receives for its share of Products
to enable the Manager to pay taxes, royalties and other payments due third
parties on a weighted average basis.
     11.2 Delegation of Authority to Sell Products Taken In Kind. Unless
Participant expressly notifies the Manager that the Participant will sell its
share of Products, a Participant will be deemed to have authorized the Manager
to sell Participant’s share of Products taken in kind for Producer’s account and
the Manager shall have the right, but not the obligation, for a period of time
consistent with the minimum needs of the industry, but not to exceed one
(1) year from the notice date described in Section 11.1, to purchase the
Participant’s share for its own account or to sell such share as agent for the
Participant at not less than the prevailing market price in the area. Subject to
the terms of any such contracts of sale then outstanding, during any period that
the Manager is purchasing or selling a Participant’s share of production, the
Participant may elect by notice to the Manager to terminate its delegation of
authority and sell all or part of its share of Products taken in kind. The
Manager shall be entitled to deduct from proceeds of any sale by it for the
account of a Participant reasonable expenses incurred in such a sale.
     11.3 Hedging. Neither Participant shall have any obligation to account to
the other Participant for, nor have any interest or right of participation in
any profits or proceeds 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 Participant with
respect to its proportionate share of any Products produced or to be produced
from the Properties.

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ARTICLE XII
WITHDRAWAL AND TERMINATION
     12.1 Termination by Expiration or Agreement. This Agreement shall terminate
as expressly provided in Section 2.5, unless earlier terminated by written
agreement.
     12.2 Termination by Deadlock. If the Management Committee fails to adopt a
Program and Budget within twelve (12) months after the expiration of the latest
adopted Program and Budget, either Participant may elect to terminate the
Business by giving sixty (60) days notice of termination to the other
Participant.
     12.3 Withdrawal. Horizon shall be deemed to have withdrawn from the
Business if it fails to complete its Initial Contributions as required by
Subsection 5.1(b). Either Participant may withdraw from the Business by giving
notice to the other Participant of the effective date of withdrawal, which shall
be the later of the end of the then current Program Period or thirty (30) days
after the date of the notice. Upon such withdrawal, the Business shall
terminate, and the withdrawing Participant shall be deemed to have transferred
to the remaining Participant all of its Participating Interest, including all of
its interest in the Assets, without cost and free and clear of all Encumbrances
arising by, through or under such withdrawing Participant, except those
described in Paragraph 1.1 of Exhibit A and those to which both Participants
have agreed. The withdrawing Participant shall execute and deliver all
instruments as may be necessary in the reasonable judgment of the other
Participant to effect the transfer of its interests in the Assets to the other
Participant. If within a sixty (60) day period both Participants elect to
withdraw, then the Business shall instead be deemed to have been terminated by
the consent of the Participants pursuant to Section 12.1.
     12.4 Continuing Obligations and Environmental Liabilities. On termination
of the Business under Sections 12.1, 12.2 or 12.3, each Participant shall remain
liable for its respective share of liabilities to third persons (whether such
arises before or after such withdrawal), including Environmental Liabilities and
Continuing Obligations. The withdrawing Participant’s share of such liabilities
shall be equal to its Participating Interest at the time such liability was
incurred, after first taking into account any reduction, readjustment, and
restoration of Participating Interests under Sections 6.3, 9.5, 9.6 and 10.5
(or, as to liabilities arising prior to the Effective Date, its initial
Participating Interest).
     12.5 Disposition of Assets on Termination. Promptly after termination under
Sections 12.1 or 12.2, the Manager shall take all action necessary to wind up
the activities of the Business, in accordance with Exhibit C. All costs and
expenses incurred in connection with the termination of the Business shall be
expenses chargeable to the Business Account.

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     12.6 Non-Compete Covenants. Neither a Participant that withdraws pursuant
to Section 12.3, or is deemed to have withdrawn pursuant to Sections 5.2, 6.3 or
10.5, nor any Affiliate of such a Participant, shall directly or indirectly
acquire any interest or right to explore or mine, or both, on any property any
part of which is within the Area of Interest for twelve (12) months after the
effective date of withdrawal. If a withdrawing Participant, or the Affiliate of
a withdrawing Participant, breaches this Section 12.6, such Participant shall be
obligated to offer to convey to the non-withdrawing Participant, without cost,
any such property or interest so acquired (or ensure its Affiliate offers to
convey the property or interest to the non-withdrawing Participant, if the
acquiring party is the withdrawing Participant’s Affiliate). Such offer shall be
made in writing and can be accepted by the non-withdrawing Participant at any
time within ten (10) days after the offer is received by such non-withdrawing
Participant. Failure of a Participant’s Affiliate to comply with this
Section 12.6 shall be a breach by such Participant of this Agreement.
     12.7 Right to Data After Termination. After termination of the Business
pursuant to Sections 12.1 or 12.2, each Participant shall be entitled to make
copies of all applicable information acquired hereunder before the effective
date of termination not previously furnished to it, but a terminating or
withdrawing Participant shall not be entitled to any such copies after any other
termination or withdrawal.
     12.8 Continuing Authority. On termination of the Business under
Sections 12.1, 12.2 or 12.3 or the deemed withdrawal of either Participant
pursuant to Sections 5.2 or 10.5, the Participant which was the Manager prior to
such termination or withdrawal (or the other Participant in the event of a
withdrawal by the Manager) shall have the power and authority to do all things
on behalf of both Participants which are reasonably necessary or convenient to:
(a) wind up Operations and (b) complete any transaction and satisfy any
obligation, unfinished or unsatisfied, at the time of such termination or
withdrawal, if the transaction or obligation arises out of Operations prior to
such termination or withdrawal. The Manager shall have the power and authority
to grant or receive extensions of time or change the method of payment of an
already existing liability or obligation, prosecute and defend actions on behalf
of both Participants and the Business, encumber Assets, and take any other
reasonable action in any matter with respect to which the former Participants
continue to have, or appear or are alleged to have, a common interest or a
common liability.

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ARTICLE XIII
ACQUISITIONS WITHIN AREA OF INTEREST
     13.1 General. Any interest or right to acquire any interest in real
property or water rights related thereto within the Area of Interest either
acquired or proposed to be acquired during the term of this Agreement by or on
behalf of either Participant (“Acquiring Participant”) or any Affiliate of such
Participant shall be subject to the terms and provisions of this Agreement.
Canyon and Horizon and their respective Affiliates for their separate account
shall be free to acquire lands and interests in lands outside the Area of
Interest and to locate mining claims outside the Area of Interest. Failure of
any Affiliate of either Participant to comply with this Article XIII shall be a
breach by such Participant of this Agreement.
     13.2 Notice to Non-Acquiring Participant. Within thirty (30) days after the
acquisition or proposed acquisition, as the case may be, of any interest or the
right to acquire any interest in real property or water rights wholly or
partially within the Area of Interest (except real property acquired by the
Manager pursuant to a Program), the Acquiring Participant shall notify the other
Participant of such acquisition by it or its Affiliate; provided further that if
the acquisition of any interest or right to acquire any interest pertains to
real property or water rights partially within the Area of Interest, then all
such real property (i.e., the part within the Area of Interest and the part
outside the Area of Interest) shall be subject to this Article XIII. The
Acquiring Participant’s notice shall describe in detail the acquisition, the
acquiring party if that party is an Affiliate, the lands and minerals covered
thereby, any water rights related thereto, the cost thereof, and the reasons why
the Acquiring Participant believes that the acquisition (or proposed
acquisition) of the interest is in the best interests of the Participants under
this Agreement. In addition to such notice, the Acquiring Participant shall make
any and all information concerning the relevant interest available for
inspection by the other Participant.
     13.3 Option Exercised. Within forty-five (45) days after receiving the
Acquiring Participant’s notice, the other Participant may notify the Acquiring
Participant of its election to accept a proportionate interest in the acquired
interest equal to its Participating Interest. Promptly upon such notice, the
Acquiring Participant shall convey or cause its Affiliate to convey to the
Participants, in proportion to their respective Participating Interests, by
special warranty deed with title held as described in Section 3.4, all of the
Acquiring Participant’s (or its Affiliate’s) interest in such acquired interest,
free and clear of all Encumbrances arising by, through or under the Acquiring
Participant (or its Affiliate) other than those to which both Participants have
agreed. The acquired interests shall become a part of the Properties for all
purposes of this Agreement immediately upon such notice. The other Participant
shall promptly pay to the Acquiring Participant its proportionate share of the
latter’s actual out-of-pocket acquisition costs.

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     13.4 Option Not Exercised. If the other Participant does not give such
notice within the forty-five (45) day period set forth in Section 13.3, it shall
have no interest in the acquired interests, and the acquired interests shall not
be a part of the Assets or continue to be subject to this Agreement.
ARTICLE XIV
ABANDONMENT AND SURRENDER OF PROPERTIES
     In accordance with Sections 7.2 and 8.2(i), unanimous consent of both
Participants is required to authorize the Manager to surrender or abandon part
or all of the Properties. If the Management Committee does not authorize such
surrender or abandonment, the Participant that desires to surrender or abandon
shall assign to the objecting Participant, by special warranty deed and without
cost to the objecting Participant, all of the abandoning Participant’s interest
in the Properties sought to be abandoned or surrendered, free and clear of all
Encumbrances created by, through, or under the abandoning Participant other than
those to which both Participants have agreed. Upon the assignment, such
properties shall cease to be part of the Properties. The Participant that
desires to abandon or surrender shall remain liable for its share (determined by
its Participating Interest as of the date of such abandonment, after first
taking into account any reduction, readjustment, and restoration of
Participating Interests under Sections 6.3, 9.5, 9.6 and 10.5) of any liability
with respect to such Properties, including, without limitation Continuing
Obligations, Environmental Liabilities and Environmental Compliance, whether
accruing before or after such abandonment, arising out of activities prior to
the Effective Date and out of Operations conducted prior to the date of such
abandonment, regardless of when any funds may be expended to satisfy such
liability.
ARTICLE XV
SUPPLEMENTAL BUSINESS AGREEMENT
     15.1 Supplemental Business Agreement. At any time during the term of this
Agreement, the Management Committee may determine by unanimous vote of both
Participants after Horizon’s Initial Contribution obligations have been fully
satisfied that it is appropriate to segregate the Area of Interest into areas
subject to separate Programs and Budgets for purposes of conducting further
Exploration, Pre-Feasibility or Feasibility Studies, Development, or Mining. At
such time, the Management Committee shall designate which portion of the
Properties will comprise an area of interest under a separate business
arrangement (“Supplemental Business”), and the Participants shall enter into a
new agreement (“Supplemental Business Agreement”) for the purpose of further
exploring, analyzing, developing, and mining such portion of the Properties. The
Supplemental Business Agreement shall be in substantially the same form as this
Agreement, with the Participants agreeing to new Capital and Equity Accounts.
Upon its

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execution, the Supplemental Business Agreement shall govern the Properties
covered by the Supplemental Business Agreement.
     15.2 Subdivided Area of Interest. Following the completion and delivery of
any Pre-Feasibility Study or Feasibility Study, if one Participant desires to
proceed with further Studies or Development and the other Participant does not,
the Participants agree to take the actions necessary to subdivide or otherwise
carve-out the Area of Interest and Business and enter into a Supplemental
Business Agreement that will govern the new Supplemental Business in accordance
with Section 15.1. Upon the effective date of the Supplemental Business
Agreement, the Participants’ initial Participating Interests in the Supplemental
Business shall be equal to their then current respective Participating Interests
under this Agreement. However, the Participants’ respective Participating
Interests shall be recalculated as a Participant contributes a lesser amount
than in proportion to its respective Participating Interest consistent with the
dilution and Account recalculation mechanisms described in Subsections 9.5(b)
and (c). Until such time as a Reduced Participant’s Recalculated Participating
Interest drops to less than fifteen percent (15%) and is converted to a
Production Royalty in accordance with Section 6.3, a Reduced Participant may
take actions to restore its diluted Participating Interest, but only in
accordance with Subsection 9.5(d).
ARTICLE XVI
TRANSFER OF INTEREST; PREEMPTIVE RIGHT
     16.1 General. A Participant shall have the right to Transfer to a third
party an interest in its Participating Interest, including an interest in this
Agreement or the Assets, solely as provided in this Article XVI.
     16.2 Limitations on Free Transferability. Any Transfer by either
Participant under Section 16.1 shall be subject to the following limitations:
          (a) Neither Participant shall Transfer any interest in this Agreement
or the Assets (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 Participating Interest;
          (b) No transferee of all or any part of a Participant’s Participating
Interest shall have the rights of a Participant unless and until the
transferring Participant has provided to the other Participant notice of the
Transfer, and, except as provided in Subsections 16.2(g) and 16.2(h), 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
Participant;

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          (c) Neither Participant, without the consent of the other Participant,
shall make a Transfer that shall violate any Law, or result in the cancellation
of any permits, licenses, or other similar authorization;
          (d) No Transfer permitted by this Article XVI shall relieve the
transferring Participant of its share of any liability, whether accruing before
or after such Transfer, which arises out of Operations conducted prior to such
Transfer or exists on the Effective Date;
          (e) [Intentionally Omitted]
          (f) In the event of a Transfer of less than all of a Participating
Interest, the transferring Participant and its transferee shall act and be
treated as one Participant by notifying the non-transferring Participant of
their designated Agent to act on their behalf with respect to all matters
pertaining to this Agreement and the Business. The transferring Participant and
its transferee may change the Agent (but such replacement must be one of them)
by giving notice to the other Participant. Such notices must conform to
Subsection 16.2(f)(ii).
          (g) If the Transfer is the grant of an Encumbrance in a Participating
Interest to secure a loan or other indebtedness of either Participant 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 Participant’s
financing payment or performance of that Participant’s obligations under this
Agreement and shall be subject to the terms of this Agreement and the rights and
interests of the other Participant hereunder (including without limitation under
Section 6.7). Any such Encumbrance shall be further subject to the condition
that the holder of such Encumbrance (“Chargee”) first enter into a written
agreement with the other Participant in form satisfactory to the other
Participant, 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 Participant’s
Participating 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
Participant’s Participating Interest to the other Participant, or, failing such
a sale, at a public auction to be held at least ten (10) days after prior notice
to the other Participant, such sale to be subject to the purchaser entering into
a written agreement with the other Participant whereby such purchaser assumes
all obligations of the encumbering Participant under the terms of this
Agreement. The price of any preemptive sale to the other Participant shall be

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the remaining principal amount of the loan plus accrued interest and related
expenses, and such preemptive sale shall occur within sixty (60) days of the
Chargee’s notice to the other Participant of its intent to sell the encumbering
Participant’s Participating Interest. Failure of a sale to the other Participant
to close by the end of such period, unless failure is caused by the encumbering
Participant or by the Chargee, shall permit the Chargee to sell the encumbering
Participant’s Participating Interest at a public sale; and
               (iii) the charge shall be subordinate to any then-existing debt,
including Project Financing previously approved by the Management Committee,
encumbering the transferring Participant’s Participating Interest;
          (h) If a sale or other commitment or disposition of Products or
proceeds from the sale of Products by either Participant upon distribution to it
pursuant to Article XI creates in a third party a security interest by
Encumbrance 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 including, without limitation, Section 6.7.
     16.3 Preemptive Right. Any Transfer by either Participant under
Section 16.1 and any Transfer by an Affiliate of Control of either Participant
shall be subject to a preemptive right of the other Participant as described
below.
          (a) If either Participant intends to Transfer all or any part of its
Participating Interest, or an Affiliate of either Participant intends to
Transfer Control of such Participant (“Transferring Entity”), such Participant
shall promptly notify the other Participant of such intent. 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 non-monetary
consideration and stated in terms of cash or currency).
          (b) The other Participant shall have ninety (90) days from the date
such notice is received to notify 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 set forth in the
notice. If it does so elect, the acquisition by the other Participant shall be
consummated promptly after notice of such election is delivered.
          (c) If the other Participant fails to so elect within the period
provided for above, the Transferring Entity shall have one hundred eighty
(180) days following the expiration of such period to consummate the Transfer to
the third party at a price and on terms no less favorable to the Transferring
Entity than those offered. If the Transferring

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Entity fails to consummate the Transfer to a third party within the period set
forth above, the preemptive right of the other Participant in 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 set forth
in this Subsection.
          (d) These procedures shall not apply to the following:
               (i) Transfer by either Participant of all or any part of its
Participating Interest to an Affiliate; pursuant to an incorporation, or
corporate consolidation or reorganization of a Participant 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 Participant; or corporate merger or
amalgamation 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 Participant.
               (ii) Subject to Subsection 16.2(g) of the Agreement, the grant by
either Participant of a security interest in its Participating Interest by
Encumbrance.
               (iii) the creation by any Affiliate of either Participant of an
Encumbrance affecting its Control of such Participant.
               (iv) a sale or other commitment or disposition of Products or
proceeds from sale of Products by either Participant upon distribution to it
pursuant to Article XI of the Agreement.
          (e) Failure of a Participant’s Affiliate to comply with this
Article XVI shall be a breach by such Participant of this Agreement.
ARTICLE XVII
DISPUTES
     17.1 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado, without regard for any
conflict of laws or choice of laws principles that would permit or require the
application of the laws of any other jurisdiction.
     17.2 Venue. The Participants agree that the location for any arbitration
proceeding shall be Golden, Colorado.
     17.3 Alternative Dispute Resolution. The Participants prefer to attempt to
settle and resolve any controversy or claim relating to this Agreement
informally

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through good faith face to face negotiations between executive representatives
of each Participant having the authority to settle. The Participants’
representatives agree to meet within sixty (60) days of a Participant’s written
notice to the other of a dispute requiring resolution. If the Participants have
not reached a mutually agreeable resolution to such dispute within thirty (30)
days of the meeting, either Participant may seek resolution via binding
arbitration pursuant to the American Arbitration Association rules of
arbitration.
     17.4 Fees and Costs. All disputes arising under or in connection with this
Agreement which cannot be resolved by agreement between the Participants shall
be resolved in accordance with applicable Law. If any legal action or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or substantially prevailing
Participant shall be entitled to recover reasonable attorneys’ fees and other
costs incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.
ARTICLE XVIII
CONFIDENTIALITY, OWNERSHIP, USE AND DISCLOSURE OF INFORMATION
     18.1 Business Information. All Business Information shall be owned jointly
by the Participants as their Participating Interests are determined pursuant to
this Agreement. Except as provided in Sections 18.3 and 18.4, or with the prior
written consent of the other Participant, each Participant shall keep
confidential and not disclose to any third party or the public any portion of
the Business Information that constitutes Confidential Information.
     18.2 Participant Information. In performing its obligations under this
Agreement, neither Participant shall be obligated to disclose any Participant
Information. If a Participant elects to disclose Participant Information in
performing its obligations under this Agreement, such Participant Information,
together with all improvements, enhancements, refinements and incremental
additions to such Participant Information that are developed, conceived,
originated or obtained by either Participant in performing its obligations under
this Agreement (“Enhancements”), shall be owned exclusively by the Participant
that originally developed, conceived, originated or obtained such Participant
Information. Each Participant may use and enjoy the benefits of such Participant
Information and Enhancements in the conduct of the Business hereunder, but the
Participant that did not originally develop, conceive, originate or obtain such
Participant Information may not use such Participant Information and
Enhancements for any other purpose. Except as provided in Section 18.4, or with
the prior written consent of the other Participant, which consent may be
withheld in such Participant’s sole discretion, each Participant shall keep
confidential and not disclose to any third party or the public any

45

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portion of Participant Information and Enhancements owned by the other
Participant that constitutes Confidential Information.
     18.3 Permitted Disclosure of Confidential Business Information. Either
Participant may disclose Business Information that is Confidential Information:
(a) to a Participant’s officers, directors, partners, members, employees,
Affiliates, shareholders, agents, attorneys, accountants, consultants,
contractors, subcontractors or advisors, for the sole purpose of such
Participant’s performance of its obligations under this Agreement; (b) to any
bona fide potential transferee to whom the disclosing Participant contemplates a
Transfer of all or any part of its Participating Interest, for the sole purpose
of evaluating the proposed Transfer; (c) to any actual or potential lender,
underwriter or investor for the sole purpose of evaluating whether to make a
loan to or investment in the disclosing Participant; or (d) to a third party
with whom the disclosing Participant contemplates any independent business
activity or operation.
          The Participant disclosing Confidential Information pursuant to this
Section 18.3, shall disclose such Confidential Information to only those parties
who have a bona fide need to have access to such Confidential Information for
the purpose for which disclosure to such parties is permitted under this
Section 18.3 and who have agreed in writing supplied to, and enforceable by, the
other Participant to protect the Confidential Information from further
disclosure, to use such Confidential Information solely for such purpose and to
otherwise be bound by the provisions of this Article XVIII. Such writing shall
not preclude parties described in Subsection 18.3(b) from discussing and
completing a Transfer with the other Participant. The Participant disclosing
Confidential Information shall be responsible and liable for any use or
disclosure of the Confidential Information by such parties in violation of this
Agreement and such other writing.
     18.4 Disclosure Required By Law. Notwithstanding anything contained in this
Article XVIII, a Participant may disclose any Confidential Information if, in
the opinion of the disclosing Participant’s legal counsel: (a) such disclosure
is legally required to be made in a judicial, administrative or governmental
proceeding pursuant to a valid subpoena or other applicable order; or (b) such
disclosure is legally required to be made pursuant to the rules or regulations
of a stock exchange or similar trading market applicable to the disclosing
Participant.
          Prior to any disclosure of Confidential Information under this
Section 18.4, the disclosing Participant shall give the other Participant at
least ten (10) days prior written notice (unless less time is required by such
rules, regulations or proceeding) and, in making such disclosure, the disclosing
Participant shall disclose only that portion of Confidential Information
required to be disclosed and shall take all reasonable steps to preserve the
confidentiality thereof, including, without limitation, obtaining protective
orders and supporting the other Participant in intervention in any such
proceeding.

46

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     18.5 Public Announcements. Prior to making or issuing any press release or
other public announcement or disclosure of Business Information that is not
Confidential Information, a Participant shall first consult with the other
Participant as to the content and timing of such announcement or disclosure,
unless in the good faith judgment of such Participant, there is not sufficient
time to consult with the other Participant before such announcement or
disclosure must be made under applicable Laws; but in such event, the disclosing
Participant shall notify the other Participant, as soon as possible, of the
pendency of such announcement or disclosure, and it shall notify the other
Participant before such announcement or disclosure is made if at all reasonably
possible. Any press release or other public announcement or disclosure to be
issued by either Participant relating to this Business shall also identify the
other Participant.
ARTICLE XIX
GENERAL PROVISIONS
     19.1 Notices. All notices, payments and other required or permitted
communications (“Notices”) to either Participant shall be in writing, and shall
be addressed respectively as follows:

                      If to Canyon:       14142 Denver West Parkway
 
              Suite 250
 
              Golden, CO 80401
 
      Attention:       James K. B. Hesketh
 
      Telephone:       (303) 278-8464
 
      Facsimile:       (303) 279-3772
 
                                With a Copy to:       Bruce C. Kirchhoff
 
              Carver Kirchhoff Schwarz
 
              McNab & Bailey, LLC
 
              Hudson’s Bay Centre
 
              1600 Stout Street, Suite 1700
 
              Denver, Colorado 80202
 
      Telephone:       (303) 531-6482
 
      Facsimile:       (303) 592-7680

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                      If to Horizon:       2221 East Street
 
              Suite 200
 
              Golden, CO 80401
 
      Attention:       William R. Wilson
 
      Telephone:       (303) 422-7803
 
      Facsimile:       (303) 940-9572
 
                                With a Copy to:       Paul C. Jones
 
              2221 East Street, Suite 200
 
              Golden CO 80401
 
      Telephone:       (303) 277-1222
 
      Facsimile:       (303) 277-0006

          All Notices shall be given (a) by personal delivery to the
Participant, (b) by electronic communication, capable of producing a printed
transmission, (c) by registered or certified mail return receipt requested; or
(d) by overnight or other express courier service. All Notices shall be
effective and shall be deemed given on the date of receipt at the principal
address if received during normal business hours, and, if not received during
normal business hours, on the next business day following receipt, or if by
electronic communication, on the date of such communication. Either Participant
may change its address by Notice to the other Participant.
     19.2 Gender. The singular shall include the plural, and the plural the
singular wherever the context so requires, and the masculine, the feminine, and
the neuter genders shall be mutually inclusive.
     19.3 Currency. All references to “dollars” or “$” herein shall mean lawful
currency of the United States of America.
     19.4 Headings. The subject headings of the Sections and Subsections of this
Agreement and the Paragraphs and Subparagraphs of the Exhibits to this Agreement
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
     19.5 Waiver. The failure of either Participant to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach hereof shall not constitute a waiver of any provision of
this Agreement or limit such Participant’s right thereafter to enforce any
provision or exercise any right.
     19.6 Modification. No modification of this Agreement shall be valid unless
made in writing and duly executed by both Participants.

48

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     19.7 Force Majeure. Except for the obligation to make payments when due
hereunder, the obligations of a Participant shall be suspended to the extent and
for the period that performance is prevented by any cause, whether foreseeable
or unforeseeable, beyond its reasonable control, including, without limitation,
labor disputes (however arising and whether or not employee demands are
reasonable or within the power of the Participant to grant); acts of God; Laws,
instructions or requests of any government or governmental entity; judgments or
orders of any court; inability to obtain on reasonably acceptable terms any
public or private license, permit or other authorization; curtailment or
suspension of activities to remedy or avoid an actual or alleged, present or
prospective violation of Environmental Laws; action or inaction by any federal,
state or local agency that delays or prevents the issuance or granting of any
approval or authorization required to conduct Operations beyond the reasonable
expectations of the Participant seeking the approval or authorization; acts of
war or conditions arising out of or attributable to war, whether declared or
undeclared; riot, civil strife, insurrection or rebellion; fire, explosion,
earthquake, storm, flood, sink holes, drought or other adverse weather
condition; delay or failure by suppliers or transporters of materials, parts,
supplies, services or equipment or by contractors’ or subcontractors’ shortage
of, or inability to obtain, labor, transportation, materials, machinery,
equipment, supplies, utilities or services; accidents; breakdown of equipment,
machinery or facilities; actions by native rights groups, environmental groups,
or other similar special interest groups; or any other cause whether similar or
dissimilar to the foregoing. The affected Participant shall promptly give notice
to the other Participant of the suspension of performance, stating therein the
nature of the suspension, the reasons therefore, and the expected duration
thereof. The affected Participant shall resume performance as soon as reasonably
possible. During the period of suspension the obligations of both Participants
to advance funds pursuant to Section 10.2 shall be reduced to levels consistent
with then current Operations.
     19.8 Rule Against Perpetuities. The Participants do not intend that there
shall be any violation of the Rule Against Perpetuities, the Rule Against
Unreasonable Restraints on the Alienation of Property, or any similar rule.
Accordingly, if any right or option to acquire any interest in the Properties,
in a Participating Interest, in the Assets, or in any real property exists under
this Agreement, such right or option must be exercised, if at all, so as to vest
such interest within time periods permitted by applicable rules. If, however,
any such violation should inadvertently occur, the Participants hereby agree
that a court shall reform that provision in such a way as to approximate most
closely the intent of the Participants within the limits permissible under such
rules.
     19.9 Further Assurances. Each of the Participants shall take, from time to
time and without additional consideration, such further actions and execute such
additional instruments as may be reasonably necessary or convenient to implement
and carry out the intent and purpose of this Agreement or as may be reasonably
required by lenders in connection with Project Financing.

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     19.10 Entire Agreement; Successors and Assigns. This Agreement contains the
entire understanding of the Participants and supersedes all prior agreements and
understandings between the Participants relating to the subject matter hereof.
This Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the Participants.
     19.11 Memorandum. At the request of either Participant, a Memorandum or
short form of this Agreement, or a Financing Statement(s) (to which copies of
the Memorandum or short form of this Agreement shall be attached) shall be
prepared by the Manager, executed and acknowledged by both Participants, and
delivered to the Manager for recording and filing in those appropriate recording
districts and Uniform Commercial Code filing offices as may be necessary to
provide constructive notice of this Agreement and the rights and obligations of
the Participants hereunder. The Manager shall record and file in the proper
recording districts, county recording offices and Uniform Commercial Code filing
offices, all such documents delivered to it by the Participants. Unless both
Participants agree, this Agreement shall not be recorded.
     19.12 Counterparts. This Agreement may be executed in any number of
counterparts, and it shall not be necessary that the signatures of both
Participants be contained on any counterpart. Each counterpart shall be deemed
an original, but all counterparts together shall constitute one and the same
instrument.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
Canyon
     By       /s/ James K. B.
Hesketh                                                 
                     James K. B. Hesketh
     Its            President
Horizon
     By       /s/ Paul C.
Jones                                                             
                     Paul C. Jones
     Its            Executive Vice President and Chief Operating Officer

50

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EXHIBIT A
To
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
By And Between
Canyon Resources Corporation
And
New Horizon Uranium Corporation
ASSETS AND AREA OF INTEREST

1.1   PROPERTIES AND TITLE EXCEPTIONS

List of Mining Claims and Leases
     CONVERSE PROJECT

                                                      BLM                      
  CLAIMS   WMC #   WIDTH   LENGTH   AREA   ACRES         Scott Ranch Area      
                                 
BC-1
  WMC 268577     50       1,450       72,500       1.66       1  
BC-2
  WMC 268578     50       1,450       72,500       1.66       2  
BC-3
  WMC 268579     600       1,450       870,000       19.97       3  
BC-4
  WMC 268580     600       1,450       870,000       19.97       4  
BC-5
  WMC 268581     600       1,450       870,000       19.97       5  
BC-6
  WMC 268582     600       1,450       870,000       19.97       6  
BC-7
  WMC 268583     600       1,450       870,000       19.97       7  
BC-8
  WMC 268584     600       1,450       870,000       19.97       8  
BC-9
  WMC 268585     600       1,450       870,000       19.97       9  
BC-10
  WMC 268586     600       1,450       870,000       19.97       10  
BC-11
  WMC 268587     600       1,450       870,000       19.97       11  
BC-12
  WMC 268588     600       1,450       870,000       19.97       12  
BC-13
  WMC 268589     600       1,450       870,000       19.97       13  
BC-14
  WMC 268590     600       1,450       870,000       19.97       14  
BC-15
  WMC 268591     600       1,450       870,000       19.97       15  
BC-16
  WMC 268592     600       1,450       870,000       19.97       16  
BC-17
  WMC 268593     600       1,450       870,000       19.97       17  
BC-18
  WMC 268594     600       1,450       870,000       19.97       18  
BC-19
  WMC 268595     600       1,450       870,000       19.97       19  
BC-20
  WMC 268596     600       1,450       870,000       19.97       20  
BC-21
  WMC 268597     600       1,360       816,000       18.73       21  

EXHIBIT A
Page 1 of 9

 

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                                                      BLM                      
  CLAIMS   WMC #   WIDTH   LENGTH   AREA   ACRES        
BC-22
  WMC 268598     600       1,360       816,000       18.73       22  
BC-23
  WMC 268599     600       1,360       816,000       18.73       23  
BC-24
  WMC 268600     600       1,360       816,000       18.73       24  
BC-25
  WMC 268601     600       1,360       816,000       18.73       25  
BC-26
  WMC 268602     600       1,360       816,000       18.73       26  
BC-27
  WMC 268603     600       1,360       816,000       18.73       27  
BC-28
  WMC 268604     600       1,360       816,000       18.73       28  
BC-29
  WMC 268605     600       1,360       816,000       18.73       29  
BC-30
  WMC 268606     600       1,360       816,000       18.73       30  
BC-31
  WMC 268607     600       1,360       816,000       18.73       31  
BC-32
  WMC 268608     600       1,360       816,000       18.73       32  
BC-33
  WMC 268609     380       1,360       516,800       11.86       33  
BC-34
  WMC 268610     600       1,360       816,000       18.73       34  
BC-35
  WMC 268611     600       1,430       858,000       19.70       35  
BC-36
  WMC 268612     600       1,430       858,000       19.70       36  
BC-37
  WMC 268613     600       1,430       858,000       19.70       37  
BC-38
  WMC 268614     600       1,430       858,000       19.70       38  
BC-39
  WMC 268615     600       1,430       858,000       19.70       39  
BC-40
  WMC 268616     600       1,430       858,000       19.70       40  
BC-41
  WMC 268617     600       1,430       858,000       19.70       41  
BC-42
  WMC 268618     600       1,430       858,000       19.70       42  
BC-43
  WMC 268619     600       1,430       858,000       19.70       43  
BC-44
  WMC 268620     600       1,430       858,000       19.70       44  
BC-45
  WMC 268621     600       1,430       858,000       19.70       45  
BC-46
  WMC 268622     600       1,430       858,000       19.70       46  
BC-47
  WMC 268623     600       1,430       858,000       19.70       47  
BC-48
  WMC 268624     600       1,430       858,000       19.70       48  
BC-49
  WMC 268625     600       1,360       816,000       18.73       49  
BC-50
  WMC 268626     600       1,360       816,000       18.73       50  
BC-51
  WMC 268627     600       1,360       816,000       18.73       51  
BC-52
  WMC 268628     600       1,360       816,000       18.73       52  
BC-53
  WMC 268629     600       1,360       816,000       18.73       53  
BC-54
  WMC 268630     600       1,360       816,000       18.73       54  
BC-55
  WMC 268631     600       1,360       816,000       18.73       55  
BC-56
  WMC 268632     600       1,360       816,000       18.73       56  
BC-57
  WMC 268633     520       1,360       707,200       16.24       57  
BC-58
  WMC 268634     600       1,360       816,000       18.73       58  
BC-59
  WMC 268635     520       1,360       707,200       16.24       59  
BC-61
  WMC 268636     600       1,500       900,000       20.66       60  
BC-62
  WMC 268637     600       1,500       900,000       20.66       61  
BC-63
  WMC 268638     600       1,500       900,000       20.66       62  
BC-64
  WMC 268639     600       1,500       900,000       20.66       63  
BC-65
  WMC 268640     600       1,500       900,000       20.66       64  
BC-66
  WMC 268641     600       1,500       900,000       20.66       65  
BC-67
  WMC 268642     600       1,500       900,000       20.66       66  
BC-68
  WMC 268643     600       1,500       900,000       20.66       67  
BC-69
  WMC 268644     600       1,500       900,000       20.66       68  

EXHIBIT A
Page 2 of 9

 

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                                                      BLM                      
  CLAIMS   WMC #   WIDTH   LENGTH   AREA   ACRES        
BC-70
  WMC 268645     600       1,500       900,000       20.66       69  
BC-71
  WMC 268646     600       1,320       792,000       18.18       70  
BC-72
  WMC 268647     600       1,320       792,000       18.18       71  
BC-73
  WMC 268648     600       1,320       792,000       18.18       72  
BC-74
  WMC 268649     600       1,320       792,000       18.18       73  
BC-75
  WMC 268650     390       1,320       514,800       11.82       74  
BC-76
  WMC 268651     150       1,500       225,000       5.17       75  
BC-77
  WMC 268652     600       1,500       900,000       20.66       76  
BC-78
  WMC 268653     600       1,500       900,000       20.66       77  
BC-79
  WMC 268654     600       1,500       900,000       20.66       78  
BC-80
  WMC 268655     600       1,500       900,000       20.66       79  
BC-81
  WMC 268656     600       1,500       900,000       20.66       80  
BC-82
  WMC 268657     600       1,500       900,000       20.66       81  
BC-83
  WMC 268658     600       1,500       900,000       20.66       82  
BC-84
  WMC 268659     600       1,500       900,000       20.66       83  
BC-85
  WMC 268660     600       1,500       900,000       20.66       84  
BC-86
  WMC 268661     600       1,500       900,000       20.66       85  
BC-87
  WMC 268662     160       1,500       240,000       5.51       86  
BC-88
  WMC 268663     160       1,500       240,000       5.51       87  
BC-89
  WMC 268664     600       1,500       900,000       20.66       88  
BC-90
  WMC 268665     600       1,500       900,000       20.66       89  
BC-91
  WMC 268666     83       1,200       99,600       2.29       90  
BC-92
  WMC 268667     83       1,350       112,050       2.57       91  
 
                            Acres         1655.18           S. Douglas Area    
                                   
SD-9
  WMC 268767     600       1,320       792,000       18.18       1  
SD-10
  WMC 268768     600       1,370       822,000       18.87       2  
SD-11
  WMC 268769     600       1,320       792,000       18.18       3  
SD-12
  WMC 268770     600       1,370       822,000       18.87       4  
SD-13
  WMC 268771     600       1,320       792,000       18.18       5  
SD-14
  WMC 268772     600       1,370       822,000       18.87       6  
SD-15
  WMC 268773     600       1,320       792,000       18.18       7  
SD-16
  WMC 268774     600       1,370       822,000       18.87       8  
SD-17
  WMC 268775     600       1,320       792,000       18.18       9  
SD-18
  WMC 268776     600       1,370       822,000       18.87       10  
SD-19
  WMC 268777     600       1,320       792,000       18.18       11  
SD-20
  WMC 268778     600       1,370       822,000       18.87       12  
SD-21
  WMC 268779     600       1,320       792,000       18.18       13  
SD-22
  WMC 268780     600       1,370       822,000       18.87       14  
SD-23
  WMC 268781     600       1,320       792,000       18.18       15  
SD-24
  WMC 268782     600       1,370       822,000       18.87       16  
SD-25
  WMC 268783     400       1,320       528,000       12.12       17  
SD-26
  WMC 268784     400       1,370       548,000       12.58       18  
SD-27
  WMC 268785     600       1,320       792,000       18.18       19  
SD-28
  WMC 268786     600       1,320       792,000       18.18       20  
SD-29
  WMC 268787     220       1,320       290,400       6.67       21  
SD-30
  WMC 268788     150       1,500       225,000       5.17       22  

EXHIBIT A
Page 3 of 9

 

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                                                      BLM                      
  CLAIMS   WMC #   WIDTH   LENGTH   AREA   ACRES        
SD-31
  WMC 268789     600       1,500       900,000       20.66       23  
SD-32
  WMC 268790     600       1,500       900,000       20.66       24  
SD-33
  WMC 268791     600       1,500       900,000       20.66       25  
SD-34
  WMC 268792     600       1,500       900,000       20.66       26  
SD-35
  WMC 268793     600       1,500       900,000       20.66       27  
SD-36
  WMC 268794     600       1,500       900,000       20.66       28  
SD-37
  WMC 268795     600       1,500       900,000       20.66       29  
SD-38
  WMC 268796     600       1,500       900,000       20.66       30  
SD-39
  WMC 268797     600       1,500       900,000       20.66       31  
SD-40
  WMC 268798     600       1,500       900,000       20.66       32  
SD-41
  WMC 268799     350       1,500       525,000       12.05       33  
SD-42
  WMC 268800     350       1,500       525,000       12.05       34  
SD-45
  WMC 268801     600       1,500       900,000       20.66       35  
SD-46
  WMC 268802     600       1,500       900,000       20.66       36  
SD-47
  WMC 268803     600       1,500       900,000       20.66       37  
SD-48
  WMC 268804     600       1,500       900,000       20.66       38  
SD-49
  WMC 268805     300       1,500       450,000       10.33       39  
SD-57
  WMC 268806     600       1,445       867,000       19.90       40  
SD-59
  WMC 268807     600       1,445       867,000       19.90       41  
SD-60
  WMC 268808     600       1,200       720,000       16.53       42  
SD-62
  WMC 268809     600       1,200       720,000       16.53       43  
SD-100
  WMC 268810     600       1,395       837,000       19.21       44  
SD-101
  WMC 268811     600       1,395       837,000       19.21       45  
 
                            Acres          804.30           Shawnee Area        
                               
SH-1
  WMC 268668     600       1,400       840,000       19.28       1  
SH-2
  WMC 268669     600       1,400       840,000       19.28       2  
SH-3
  WMC 268670     600       1,400       840,000       19.28       3  
SH-4
  WMC 268671     600       1,400       840,000       19.28       4  
SH-5
  WMC 268672     600       1,400       840,000       19.28       5  
SH-6
  WMC 268673     600       1,400       840,000       19.28       6  
SH-7
  WMC 268674     460       1,400       644,000       14.78       7  
SH-8
  WMC 268675     600       1,400       840,000       19.28       8  
SH-9
  WMC 268676     600       1,400       840,000       19.28       9  
SH-10
  WMC 268677     600       1,400       840,000       19.28       10  
SH-11
  WMC 268678     600       1,400       840,000       19.28       11  
SH-12
  WMC 268679     600       1,400       840,000       19.28       12  
SH-13
  WMC 268680     600       1,400       840,000       19.28       13  
SH-14
  WMC 268681     600       1,400       840,000       19.28       14  
SH-15
  WMC 268682     600       1,400       840,000       19.28       15  
SH-16
  WMC 268683     600       1,400       840,000       19.28       16  
SH-17
  WMC 268684     600       1,400       840,000       19.28       17  
SH-18
  WMC 268685     600       1,400       840,000       19.28       18  
SH-19
  WMC 268686     600       1,400       840,000       19.28       19  
SH-20
  WMC 268687     460       1,400       644,000       14.78       20  
SH-21
  WMC 268688     460       1,400       644,000       14.78       21  

EXHIBIT A
Page 4 of 9

 

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                                                      BLM                      
  CLAIMS   WMC #   WIDTH   LENGTH   AREA   ACRES        
SH-25
  WMC 268689     600       1,500       900,000       20.66       22  
SH-26
  WMC 268690     600       1,500       900,000       20.66       23  
SH-27
  WMC 268691     600       1,500       900,000       20.66       24  
SH-28
  WMC 268692     600       1,500       900,000       20.66       25  
SH-29
  WMC 268693     440       1,500       660,000       15.15       26  
SH-30
  WMC 268694     600       1,500       900,000       20.66       27  
SH-31
  WMC 268695     600       1,500       900,000       20.66       28  
SH-32
  WMC 268696     270       1,500       405,000       9.30       29  
SH-33
  WMC 268697     600       1,500       900,000       20.66       30  
SH-34
  WMC 268698     600       1,500       900,000       20.66       31  
SH-35
  WMC 268699     300       1,500       450,000       10.33       32  
 
                                               
 
                            Acres       591.53          
 
                                    3,051.0                               TOTAL
ACRES     1          

AGREEMENTS
South Douglas Prospect

  1.   Surface Use Agreement dated 7/7/2005 with Fellows, Tim & Lori for 72.66
acres in Township 32N, Range 71W, Sections 19 and 20.     2.   Surface Use
Agreement dated 7/8/2005 with Arnbrister, Tom & Mary E. for 19.35 acres in
Township 32N, Range 71W, Section 19.     3.   Surface Use Agreement dated
7/15/2005 with Philbrick Ranch, L.L.C. for 350.14 acres in Township 32N, Range
71W, Sections 31 and 32.

Scott Ranch Prospect

  1.   Surface Use Agreement dated 7/13/2005 with Johnson, Sam & Robin for 36
acres in Township 32N, Range 70W, Section 19.     2.   Surface Use Agreement
dated 7/27/2005 with Markwardt, David & Lois for 55.92 in Township 32N, Range
70W, Section 19.     3.   Surface Use Agreement dated 10/11/2005 with Scott
Ranches, L.L.C. for 1,280 acres in Township 32N, Range 70W, Sections 19-21 and
30.

1.2   PERSONAL PROPERTY

Index of Converse Project Files
Canyon Resources Corporation
Converse County,Wyoming
Prepared November 18, 2005 by Steven R. Davis
REPORTS/PUBLICATIONS
Bauer, J. et. al., 1982, Shawnee Project, Converse County, Wyoming — Results of
the 1981 Drilling Campaign (Elf Aquitaine), Cross-Sections. Binder w/o index
contains plate 8 through 16 (9)
EXHIBIT A
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of cross-sections on program drill holes.
Bauer J. et. al., 1982, Shawnee Project, Converse County, Wyoming — Results of
the 1981 Drilling Campaign (Elf Aquitaine), Maps. Binder w/o index contains six
folded maps (plates 1-6) of geology, land status, drill hole locations and
structural contour maps on geologic horizons (3).
Bauer, J., Marcus, Donald L., 1982, Results of 1982 Shawnee Exploration Program
(Elf Aquitaine), 30 pages text, four section Appendix (A – D), and “Plates and
Figures” — including Figures 1-8 and Plates Ia, II through VII (Roman) and Plate
7.
Bauer, J., 1981, Greater Shawnee Project (Morton Ranch Area), Converse County,
Wyoming; Results of the 1981 Drilling Campaign (Elf Aquitaine Mining Corporation
— Canyon Resources Joint Venture). Includes 4 figures and two plates, plus a
number of drill hole radiometric logs (oil/gas and uranium drill holes). Two
Copies.
Canyon Resources, et. al., March 1981, Shawnee Uranium Project, Southern Powder
River Basin, Wyoming. 39 pages, includes 12 figures and 3 appendices (5 copies).
Canyon Resources, et. al., October 1983, Shawnee Uranium Project Summary Report,
Converse County, Wyoming, 18 pages (includes14figures).
Collings, Stephen P., Knode, Ralph H., 1982, Crow Butte Uranium Project
(Deposit), Wyoming Fuel Company. 10 pages, including 3 figures. (kept inside
First Exploration Company 1982 Annual Report.)
Denson, N.M., Horn, G.H., 1976, Geologic and Structure Map of the Southern Part
of the Powder River Basin, Converse, Niobrara and Natrona Counties, Wyoming.
1:125,000, USGS Miscellaneous Investigations Series Map I-877 (2 sheets).
First Exploration Company, 1982 Annual Report, 9 pages plus Appendix of NUEXCO
Monthly Report on the Nuclear Fuel Market #175, March 1983.
Mueller, Joseph W., 1976, Geology and Ore Controls of Uranium Deposits in
Oligocene and Miocene Sediments, Northern Hartville Uplift, Wyoming, Masters
Thesis, Colorado School of Mines
Love, J.D., Christiansen, Ann Coe, Sever, C.K., 1978, Preliminary Geological Map
of the Torrington 1º x 2º Quadrangle, 1:250,000, USGS Open File Report 78-535
EXHIBIT A
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Love, J.D., Christiansen, Ann Coe, Sever, C.K., 1980, The Torrington 1º x 2º
Quadrangle, Southeastern Wyoming and Western Nebraska, 1:250,000, USGS
Miscellaneous Field Studies Map MF-1184.
Mueller, Joseph W., 1976, Geology and Ore Controls of Uranium Deposits in
Oligocene and Miocene Sediments, Northern Hartville Uplift, Wyoming, Masters
Thesis, Colorado School of Mines.
MAP FILES
Sabine GT Map File, 1978-1981, Land Status Map, Correspondence, Joint Venture
Proposal and three GT maps for the A, B &C Sands (horizons) at 1” = 1,000’.
Oil Well Data, Converse Project map file. Has five (?) oil well logs (copies),
two maps and eight pages of hand written research notes regarding oil/gas wells
in the project area.
Aquitaine Mining, Converse Project map file (some correspondence included).
Isopach map of Shawnee Project Tertiary sediments (1” = 2mi ±), Thickness
(Isopach) main basal sand interval (Chadron Sand), White River fm, Shawnee
Project 1” = 2,000’. Table of Shawnee Project 1981 drilling, 5 pages, and map of
greater project area (Shawnee) with the area of properties held/subject to the
agreement. Five pages handwritten notes.
Analytical Results, Converse Project (not a map file). Bondar-Clegg results on
what appears to be water samples only (results in ppb), two pages 35 sample
results (three copies of the second page).
High Plains Uranium, Converse Project (file). A three-page summary of the
company’s management and directors with a “Strategy Statement.” A 19 page Power
Point presentation w/cover letter — sent to Gary Huber by Ted Wilton (May 18,
2005).
Shawnee Report 10/1983, Converse Project. A loose (unbound) copy of the Canyon
Resources Corporation Summary Report on the Shawnee Project, dated October,
1983.
BLM Land Maps, Converse Project. Folded 1:100,000 scale standard (feet) and
metric maps of the Douglas, Wyoming 30’ x 60’ quadrangle (std. 1995, metric
1981), one copy of each. Includes a four piece Xerox mosaic of the project area
of this map, and two 8 1/2” x 11” copies of immediate Douglas (Sabine) and
Shawnee areas.
Shawnee Report 03/01/1981, Converse Project. A clipped, but unbound copy of the
Canyon Resources Corporation report on the
EXHIBIT A
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Shawnee Uranium Project, dated March 1, 1981.
Topographic Maps file, Converse Project. Includes eight 7 1/2” USGS Topographic
maps from in or near the area of the Converse Project (two are partial/cutoff,
individual names of maps not noted).
Miscellaneous Maps, Converse Project (Folder). Niobrara County Map, 1953,
(1:63,360) w/oil/gas well pre-Tertiary or TD rock type noted by stickers and
hand notes; Niobrara County Map, 1953, (1:63,360) w/hand drawn geology in area 2
to 13 miles south of the small village of Redbird; Subcrop map of Northern
Hartville Uplift, Converse and Niobrara Counties, Wyoming, 1/15/1975, Geology by
J. Mueller; Geology of Northern Hartville Uplift, Converse and Niobrara
Counties, Wyoming, 01/15/1975, Modified after Denson (1972) by J. Mueller. Plate
10A. — Contours on the Base of the Pre-Oligocene Surface and Pre-Oligocene
Geologic Map, Compiled by David L. Macke and Norman M. Denson, USGS.
Sabine Maps, Converse Project (Folder), Eight detailed maps and a number of
drill logs (examined very briefly, no details).
Converse Project Map File, Earth Sciences Corporation, Several varied maps from
early Earth Sciences work in the area — not examined in detail (time).
Drill hole logs, Converse Project, full size probe logs and a few “mini-logs”
from the early 1980’s drilling programs — not examined in detail (time).
1.3 AREA OF INTEREST
The Plat on the next page identifies the Converse Project Boundary, encompassing
lands in both Converse and Niobrara Counties, Wyoming.
EXHIBIT A
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EXHIBIT A — Page 9 of 9
Converse Uranium Project, Area of Interest
(CONVERSE URANIUM PROJECT LAYOUT) [d34102d3410209.gif]

 

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EXHIBIT B
To
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
By And Between
Canyon Resources Corporation
And
New Horizon Uranium Corporation
ACCOUNTING PROCEDURES
     The financing and accounting procedures to be followed by the Manager and
the Participants under the Agreement are set forth below. All capitalized terms
in these Accounting Procedures shall have the definition attributed to them in
the Agreement, unless defined otherwise herein.
     The purpose of these Accounting Procedures is to establish equitable
methods for determining charges and credits applicable to Operations. It is the
intent of the Participants that neither of them shall lose or profit by reason
of the designation of one of them to exercise the duties and responsibilities of
the Manager. The Participants shall meet and in good faith endeavor to agree
upon changes deemed necessary to correct any unfairness or inequity. In the
event of a conflict between the provisions of these Accounting Procedures and
those of the Agreement, the provisions of the Agreement shall control.
ARTICLE I
GENERAL PROVISIONS
     1. General Accounting Records. The Manager shall maintain detailed and
comprehensive cost accounting records in accordance with generally accepted
accounting principles used by companies based in the United States (“US GAAP”).
For purposes of this Agreement, US GAAP shall mean the written opinions,
standards, interpretations, and bulletins developed by the Financial Accounting
Standards Board (“FASB”), the accounting profession (“AICP”), and the Security
and Exchange Commission (“SEC”). Cost accounting records maintained under these
Accounting Procedures, shall 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 Business. Such records shall be retained for the duration of the
period allowed the Participants for audit or the period necessary to comply with
tax or other
EXHIBIT B
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regulatory requirements. The records shall reflect all obligations, advances and
credits of the Participants.
     2. Cash Management Accounts. The Manager shall maintain one or more
separate cash management accounts for the payment of all expenses and the
deposit of all cash receipts for the Business.
     3. Statements and Billings. The Manager shall prepare statements and bill
the Participants as provided in Article X of the Agreement. Payment of any such
billings by either Participant, including the Manager, shall not prejudice such
Participant’s right to protest or question the correctness thereof for a period
not to exceed twenty-four (24) months following the calendar year during which
such billings were received by such Participant. All written exceptions to and
claims upon the Manager for incorrect charges, billings or statements shall be
made upon the Manager within such twenty-four (24) month period. The time period
permitted for adjustments hereunder shall not apply to adjustments resulting
from periodic inventories as provided in Paragraphs 5.1 and 5.2.
ARTICLE II
CHARGES TO BUSINESS ACCOUNT
     Subject to the limitations hereinafter set forth, the Manager shall charge
the Business Account with the following:
     2.1 Property Acquisition Costs, Rentals, Royalties and Other Payments. All
property acquisition and holding costs, including Governmental Fees, filing
fees, license fees, costs of permits and assessment work, delay rentals,
production royalties, including any required advances, and all other payments
made by the Manager which are necessary to acquire or maintain title to the
Assets.
     2.2 Labor and Employee Benefits
          2.2.1 Salaries and wages of the Manager’s employees directly engaged
in Operations, including salaries or wages of employees who are temporarily
assigned to and directly employed by same.
          2.2.2 The Manager’s cost of holiday, vacation, sickness and disability
benefits, and other customary allowances applicable to the salaries and wages
chargeable under Subparagraph 2.2.1 and Paragraph 2.12. Such costs may be
charged on a “when and as paid basis” or by “percentage assessment” on the
amount of salaries and wages. If percentage assessment is used, the rate shall
be applied to wages or salaries excluding overtime and bonuses. Such rate shall
be based on the Manager’s cost experience consistent with the current range of
rates within the industry and it shall be periodically
EXHIBIT B
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reviewed, and adjusted if needed, at least annually to ensure that the total of
such charges does not exceed the actual cost thereof to the Manager.
          2.2.3 The Manager’s actual cost of established plans for employees’
group life insurance, hospitalization, pension, retirement, stock purchase,
thrift, bonus (except production or incentive bonus plans under a union contract
based on actual rates of production, cost savings and other production factors,
and similar non-union bonus plans customary in the industry or necessary to
attract competent employees, which bonus payments shall be considered salaries
and wages under Subparagraph 2.2.1 or Paragraph 2.12 rather than employees’
benefit plans) and other benefit plans of a like nature applicable to salaries
and wages chargeable under Subparagraphs 2.2.1 or Paragraph 2.12, provided that
the plans are limited to the extent feasible to those customary in the industry.
          2.2.4 Cost of assessments imposed by governmental authority that are
applicable to salaries and wages chargeable under Subparagraph 2.2(a) and
Paragraph 2.12, including all penalties except those resulting from the willful
misconduct or gross negligence of the Manager.
     2.3 Materials, Equipment and Supplies. The cost of materials, equipment and
supplies (herein called “Material”) purchased from unaffiliated third parties or
furnished by either Participant as provided in Paragraph 3.1. The Manager shall
purchase or furnish only so much Material as may be required for immediate use
in efficient and economical Operations. The Manager shall also maintain
inventory levels of Material at reasonable levels to avoid unnecessary
accumulation of surplus stock or disruption of Operations.
     2.4 Equipment and Facilities Furnished by Manager. The cost of machinery,
equipment and facilities owned by the Manager and used in Operations or used to
provide support or utility services to Operations charged at rates commensurate
with the actual costs of ownership and operation of such machinery, equipment
and facilities. Such rates shall include costs of maintenance, repairs, other
operating expenses, insurance, taxes, depreciation and interest at a rate not to
exceed Prime Rate plus three percent (3%) per annum. Such rates shall not exceed
the average commercial rates currently prevailing in the vicinity of the
Operations.
     2.5 Transportation. Reasonable transportation costs incurred in connection
with the transportation of employees and material necessary for Operations.
     2.6 Contract Services and Utilities. The cost of contract services and
utilities procured from outside sources, other than services described in
Paragraphs 2.9 and 2.13. If contract services are performed by the Manager or an
Affiliate thereof, the cost charged to the Business Account shall not be greater
than that for which comparable services and utilities are available in the open
market within the vicinity of Operations.
EXHIBIT B
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The cost of professional consultant services procured from outside sources in
excess of Twenty-Five Thousand Dollars ($25,000.00) per annum per contract shall
not be charged to the Business Account unless approved by the Management
Committee.
     2.7 Insurance Premiums. Net premiums paid for insurance required to be
carried for Operations for the protection of the Participants. When Operations
are conducted in an area where the Manager may self-insure for Worker’s
Compensation and/or Employer’s Liability under state law, the Manager may elect
to include such risks in its self-insurance program and shall charge its costs
of self-insuring such risks to the Business Account provided that such charges
shall not exceed published manual rates.
     2.8 Damages and Losses. All costs in excess of insurance proceeds necessary
to repair or replace damage or losses to any Assets resulting from any cause
other than the willful misconduct or gross negligence of the Manager. The
Manager shall furnish the Management Committee with written notice of damages or
losses as soon as practicable after a report thereof has been received by the
Manager.
     2.9 Legal and Regulatory Expense. Except as otherwise provided in
Paragraph 2.13, all legal and regulatory costs and expenses incurred in or
resulting from Operations or necessary to protect or recover the Assets of the
Business, including costs of title investigation and title curative services.
All attorneys fees and other legal costs to handle, investigate and settle
litigation or claims, and amounts paid in settlement of such litigation or
claims in excess of Twenty-Five Thousand Dollars ($25,000.00) per annum shall
not be charged to the Business Account unless approved by the Management
Committee.
     2.10 Audit. Cost of annual audits under Subsection 10.6(a).
     2.11 Taxes. All taxes, assessments and like charges on Operations and
Assets which have been paid by the Manager for the benefit of the Participants.
Each Participant is separately responsible for taxes determined or measured by a
Participant’s sales revenue or net income.
     2.12 District and Camp Expense (Field Supervision and Camp Expenses). A pro
rata portion of: (i) the salaries and expenses of the Manager’s superintendent
and other employees serving Operations whose time is not allocated directly to
such Operations, and (ii) the costs of maintaining and operating an office and
any necessary suboffice, and (iii) all necessary camps, including housing
facilities for employees, used for Operations. The expense of those facilities,
less any revenue therefrom, shall include depreciation or a fair monthly rental
in lieu of depreciation of the investment. The total of such charges for all
Properties served by the Manager’s employees and facilities shall be apportioned
to the Business Account on the basis of a ratio to be approved by the Management
Committee.
EXHIBIT B
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     2.13 Administrative Charge.
          2.13.1 Each month, the Manager shall charge the Business Account a sum
for each phase of Operations as provided below, which shall be a liquidated
amount to reimburse the Manager for its home office overhead and general and
administrative expenses to conduct each phase of Operations, and which shall be
in lieu of any management fee and for taxes based on production of Products:
               2.13.1.1 Exploration Phase — Five percent (5%) of Allowable Costs
up to and including Five Thousand Dollars ($5000), and two percent (2%) of
Allowable Costs over Five Thousand Dollars ($5000).
               2.13.1.2 Development Phase — Five percent (5%) of Allowable Costs
up to and including Ten Thousand Dollars ($10,000), and two percent (2%) of
Allowable Costs over Ten Thousand Dollars ($10,000).
               2.13.1.3 Major Construction Phase — Ten percent (10%) of
Allowable Costs up to and including Twenty-Five Thousand Dollars ($25,000), and
two percent (2%) of Allowable Costs over Twenty-Five Thousand Dollars ($25,000).
               2.13.1.4 Mining Phase — One and one half percent (1.5%) of
Allowable Costs.
          2.13.2 The term “Allowable Costs” as used in this Paragraph for a
particular phase of Operations shall mean all charges to the Business Account
excluding: (i) the administrative charge referred to herein; (ii) depreciation,
depletion or amortization of tangible or intangible Assets; (iii) amounts
charged in accordance with Paragraphs 2.1 and 2.9, and (iv) marketing costs. The
Manager shall attribute such Allowable Costs to a particular phase of Operations
by applying the following guidelines:
               (A) The Exploration Phase shall cover those Operations conducted
to ascertain the existence, location, extent or quantity of any deposit of ore
or mineral.
               (B) The Development Phase shall cover those Operations, including
Pre-Feasibility and Feasibility Study Operations, conducted to assess a
commercially feasible ore body or to extend production of an existing ore body,
and to construct or install related fixed Assets.
               (C) The Major Construction Phase shall include all Operations
involved in the construction of treatment or processing facilities.
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               (D) The Mining Phase shall include all other Operations
activities not otherwise covered above, including activities conducted after
Mining Operations have ceased.
          (c) Various phases of Operations may be conducted concurrently, in
which event the administrative charge shall be calculated separately for
Allowable Costs attributable to each phase.
          (d) The monthly administration charge determined for each phase of
Operations shall be a liquidated amount to reimburse Manager for its home office
overhead and general and administrative expenses for its conduct of Operations,
and shall be equitably apportioned among all of the properties served during
such monthly period on the basis of a ratio approved by the Management
Committee.
          (e) The following is a representative list of items that constitute
the Manager’s principal business office expenses that are expressly covered by
the administrative charge provided in this Paragraph, except to the extent that
such items are directly chargeable to the Business Account under other
provisions of this Article II:
               2.13.2.1 Administrative supervision, which includes all services
rendered by managers, department supervisors, officers and directors of the
Manager for Operations.
               2.13.2.2 Accounting, data processing, personnel administration,
billing and record keeping in accordance with governmental regulations and the
provisions of the Agreement, and preparation of reports;
               2.13.2.3 The services of tax counsel and tax administration
employees for all tax matters, including any protests, except any outside
professional fees which the Management Committee may approve as a direct charge
to the Business Account;
               2.13.2.4 Routine legal services rendered by outside sources and
the Manager’s legal staff not otherwise charged to the Business Account under
Paragraph 2.9, including property acquisition, attorney management and
oversight, and support services provided by Manager’s legal staff concerning any
litigation; and
               2.13.2.5 Rentals and other charges for office and records storage
space, telephone service, office equipment and supplies.
          (f) The Management Committee shall annually review the administrative
charges and shall amend the methodology or rates used to determine such charges
if they are found to be insufficient or excessive based on the principles that
the
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Manager shall not make a profit or suffer a loss and that it should be fairly
and adequately compensated for its costs and expenses.
     2.14 Environmental Compliance Fund. Costs of reasonably anticipated
Environmental Compliance which, on a Program basis, shall be determined by the
Management Committee and shall be based on proportionate contributions in an
amount sufficient to establish an Environmental Compliance Fund, which through
successive proportionate contributions during the life of the Business, will pay
for ongoing Environmental Compliance conducted during Operations and which will
aggregate the reasonably anticipated costs of mine closure, post-Operations
Environmental Compliance and Continuing Obligations. The Manager shall invest
such amounts on behalf of the Participants as provided in Subsection 8.2(r).
     2.15 Other Expenditures. Any reasonable direct expenditure, other than
expenditures which are covered by the foregoing provisions, incurred by the
Manager for the necessary and proper conduct of Operations.
ARTICLE III
BASIS OF CHARGES TO BUSINESS ACCOUNT
     3.1 Purchases. Material purchased and services procured from third parties
shall be charged to the Business Account by the Manager at invoiced cost,
including applicable transfer taxes, less all discounts taken. If any Material
is determined to be defective or is returned to a vendor for any other reason,
the Manager shall credit the Business Account when an adjustment is received
from the vendor.
     3.2 Material Furnished by a Participant for Use in the Business. Any
Material furnished by either Participant for use in the Business or distributed
to either Participant by the Manager shall be priced on the following basis:
          (a) New Material: New Material furnished by either Participant shall
be priced F.O.B. the nearest reputable supply store or railway receiving point,
where like Material is available, at the current replacement cost of the same
kind of Material, exclusive of any available cash discounts, at the time it is
furnished (herein called “New Price”).
          (b) Used Material.
               (i) Used Material in sound and serviceable condition and suitable
for reuse without reconditioning shall be priced as follows:
                    (a) Used Material furnished by either Participant shall be
priced at seventy-five percent (75%) of the New Price;
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                    (b) Used Material distributed to either Participant shall be
priced (i) at seventy-five percent (75%) of the New Price if such Material was
originally charged to the Business Account as new Material, or (ii) at
sixty-five percent (65%) of the New Price if such Material was originally
charged to the Business Account as good used Material at seventy-five percent
(75%) of the New Price.
               (ii) Other used Material that, after reconditioning, will be
further serviceable for original function as good secondhand Material, or that
is serviceable for original function but not substantially suitable for
reconditioning, shall be priced at fifty percent (50%) of New Price. The cost of
any reconditioning shall be borne by the transferee.
               (iii) Bad-Order Material which is no longer usable for its
original purpose without excessive repair cost but further usable for some other
purpose shall be priced on a basis comparable with items normally used for that
purpose.
               (iv) All other Material, including junk, shall be priced at a
value commensurate with its use or at prevailing prices.
          (c) Obsolete Material. Any Material that is serviceable and usable for
its original function, but its condition is not equivalent to that which would
justify a price as provided above, shall be priced by the Management Committee.
Such price shall be set at a level that will result in a charge to the Business
Account equal to the value of the service to be rendered by such Material.
     3.3 Premium Prices. Whenever Material is not readily obtainable at
published or listed prices because of national emergencies, strikes or other
unusual circumstances over which the Manager has no control, the Manager may
charge the Business Account for the required Material on the basis of the
Manager’s direct cost and expenses incurred in procuring such Material and
making it suitable for use. The Manager shall give written notice of the
proposed charge to the Participants prior to the time when such charge is to be
billed, whereupon either Participant shall have the right, by notifying the
Manager within ten (10) days of the delivery of the notice from the Manager, to
furnish at the usual receiving point all or part of its share of Material
suitable for use and acceptable to the Manager.
     3.4 Warranty of Material Furnished by the Manager or Participants. Neither
Participant warrants any Material furnished beyond any dealer’s or
manufacturer’s warranty and no credits shall be made to the Business Account for
defective Material until adjustments are received by the Manager from the
dealer, manufacturer or their respective agents.
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ARTICLE IV
DISPOSAL OF MATERIAL
          4.1 Disposition Generally. The Manager shall have no obligation to
purchase either Participant’s interest in Material. The Management Committee
shall determine the disposition of major items of surplus Material, provided the
Manager shall have the right to dispose of normal accumulations of junk and
scrap Material either by sale or by transfer to the Participants as provided in
Paragraph 4.2.
          4.2 Distribution to Participants. Any Material to be distributed to
the Participants shall be made in proportion to their respective Participating
Interests, and corresponding credits shall be made to the Business Account on
the basis provided in Paragraph 3.2.
          4.3 Sales. Sales of Material to third parties shall be credited to the
Business Account at the net amount received. Any damages or claims by the
Purchaser shall be charged back to the Business Account if and when paid.
ARTICLE V
INVENTORIES
          5.1 Periodic Inventories, Notice and Representations. At reasonable
intervals, inventories shall be taken by the Manager, which shall include all
such Material as is ordinarily considered controllable by operators of mining
properties, and the expense of conducting such periodic inventories shall be
charged to the Business Account. The Manager shall give written notice to the
Participants of its intent to take any inventory at least thirty (30) days
before such inventory is scheduled to take place. A Participant shall be deemed
to have accepted the results of any inventory taken by the Manager if the
Participant fails to be represented at such inventory.
          5.2 Reconciliation and Adjustment of Inventories. Reconciliation of
inventory with charges to the Business Account shall be made, and a list of
overages and shortages shall be furnished to the Management Committee within six
(6) months after the inventory is taken. Inventory adjustments shall be made by
the Manager to the Business Account for overages and shortages, but the Manager
shall be held accountable to the Business only for shortages due to lack of
reasonable diligence.
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EXHIBIT C
To
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
By And Between
Canyon Resources Corporation
And
New Horizon Uranium Corporation

TAX MATTERS
ARTICLE I
EFFECT OF THIS EXHIBIT
          This Exhibit shall govern the relationship of the Participants with
respect to tax matters and the other matters addressed herein. Except as
otherwise indicated, capitalized terms used in this Exhibit shall have the
meanings given to them in the Agreement. In the event of a conflict between this
Exhibit and the other provisions of the Agreement, the terms of this Exhibit
shall control.
ARTICLE II
TAX MATTERS PARTNER
          2.1 Designation of Tax Matters Partner. The Manager is hereby
designated the tax matters partner (hereinafter “TMP”) as defined in
Section 6231(a)(7) of the Internal Revenue Code of 1986 (“the Code”) and shall
be responsible for, make elections for, and prepare and file any federal and
state tax returns or other required tax forms following approval of the
Management Committee. In the event of any change in Manager, the Participant
serving as Manager at the end of a taxable year shall continue as TMP with
respect to all matters concerning such year unless the TMP for that year is
required to be changed pursuant to applicable Treasury Regulations. The TMP and
the other Participant shall use reasonable best efforts to comply with the
responsibilities outlined in this Article II and in Sections 6221 through 6233
of the Code (including any Treasury regulations promulgated thereunder) and in
doing so shall incur no liability to any other party.
          2.2 Notice. Each Participant shall furnish the TMP with such
information (including information specified in Section 6230(e) of the Code) as
it may reasonably request to permit it to provide the Internal Revenue Service
with sufficient information to allow proper notice to the Participants in
accordance with Section 6223 of the Code. The TMP shall keep each Participant
informed of all administrative and judicial proceedings
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for the adjustment at the partnership level of partnership items in accordance
with Section 6223(g) of the Code.
          2.3 Inconsistent Treatment of Partnership Item. If an administrative
proceeding contemplated under Section 6223 of the Code has begun, and the TMP so
requests, each Participant shall notify the TMP of its treatment of any
partnership item on its federal income tax return that is inconsistent with the
treatment of that item on the partnership return.
          2.4 Extensions of Limitation Periods. The TMP shall not enter into any
extension of the period of limitations as provided under Section 6229 of the
Code without first giving reasonable advance notice to the other Participant of
such intended action.
          2.5 Requests for Administrative Adjustments. Neither Participant shall
file, pursuant to Section 6227 of the Code, a request for an administrative
adjustment of partnership items for any partnership taxable year without first
notifying the other Participant. If the other Participant agrees with the
requested adjustment, the TMP shall file the request for administrative
adjustment on behalf of the partnership. If consent is not obtained within
thirty (30) days after notice from the proposing Participant, or within the
period required to timely file the request for administrative adjustment, if
shorter, either Participant, including the TMP, may file that request for
administrative adjustment on its own behalf.
          2.6 Judicial Proceedings. Either Participant intending to file a
petition under Section 6226, 6228 or other sections of the Code with respect to
any partnership item, or other tax matters involving the tax partnership, shall
notify the other Participant of such intention and the nature of the
contemplated proceeding. If the TMP is the Participant intending to file such
petition, such notice shall be given within a reasonable time to allow the other
Participant to participate in the choosing of the forum in which such petition
will be filed. If both Participants do not agree on the appropriate forum, then
the appropriate forum shall be decided in accordance with Section 7.2. If a
deadlock results, the TMP shall choose the forum. If either Participant intends
to seek review of any court decision rendered as a result of a proceeding
instituted under the preceding part of this Paragraph, such Participant shall
notify the other Participant of such intended action.
          2.7 Settlements. The TMP shall not bind the other Participant to a
settlement agreement without first obtaining the written consent of any such
Participant. Either Participant who enters into a settlement agreement for its
own account with respect to any partnership items, as defined by
Section 6231(a)(3) of the Code, shall notify the other Participant of such
settlement agreement and its terms within ninety (90) days from the date of
settlement.
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          2.8 Fees and Expenses. The TMP shall not engage legal counsel,
certified public accountants, or others without the prior consent of the
Management Committee. Either Participant may engage legal counsel, certified
public accountants, or others in its own behalf and at its sole cost and
expense. Any reasonable item of expense, including but not limited to fees and
expenses for legal counsel, certified public accountants, and others which the
TMP incurs (after proper consent by the Management Committee as provided above)
in connection with any audit, assessment, litigation, or other proceeding
regarding any partnership item, shall constitute proper charges to the Business
Account and shall be borne by the Participants as any other item which
constitutes a direct charge to the Business Account pursuant to the Agreement.
          2.9 Survival. The provisions of the foregoing paragraphs, including
but not limited to the obligation to pay fees and expenses contained in
Paragraph 2.8, shall survive the termination of the tax partnership or the
termination of either Participant’s interest in the tax partnership and shall
remain binding on the Participants for a period of time necessary to resolve
with the Internal Revenue Service or the Department of the Treasury any and all
matters regarding the federal income taxation of the tax partnership for the
applicable tax year(s).
ARTICLE III
TAX ELECTIONS AND ALLOCATIONS
          3.1 Tax Partnership Election. It is understood and agreed that the
Participants intend to create a partnership for United States federal and state
income tax purposes, and, unless otherwise agreed to hereafter by both
Participants, neither Participant shall make an election to be, or have the
arrangement evidenced hereby, excluded from the application of any provisions of
Subchapter K of the Code, or any equivalent state income tax provision. It is
understood and agreed that the Participants intend to create a partnership for
federal and state income tax purposes only (a “tax partnership”). The Manager
shall file with the appropriate office of the Internal Revenue Service a
partnership income tax return covering the Operations. The Participants
recognize that this Agreement may be subject to state income tax statutes. The
Manager shall file with the appropriate offices of the state agencies any
required partnership state income tax returns. Each Participant agrees to
furnish to the Manager any information it may have relating to Operations as
shall be required for proper preparation of such returns. The Manager shall
furnish to the other Participant for its review a copy of each proposed income
tax return at least two weeks prior to the date the return is filed.
          3.2 Tax Elections. The tax partnership shall make the following
elections for purposes of all partnership income tax returns:
               (a) To use the accrual method of accounting.
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               (b) Pursuant to the provisions at Section 706(b)(1) of the Code,
to use as its taxable year the year ended December 31. In this connection,
Canyon represents that its taxable year is the year ending December 31 and
Horizon represents that its taxable year is the year ending December 31.
               (c) To deduct currently all development expenses to the extent
possible under Section 616 of the Code.
               (d) Unless the Participants unanimously agree otherwise, to
compute the allowance for depreciation in respect of all depreciable Assets
using the maximum accelerated tax depreciation method and the shortest life
permissible or, at the election of the Manager, using the units of production
method of depreciation.
               (e) To treat advance royalties as deductions from gross income
for the year paid or accrued to the extent permitted by law.
               (f) To adjust the basis of tax partnership property under Section
754 of the Code at the request of either Participant;
               (g) To amortize over the shortest permissible period all
organizational expenditures and business start-up expenses under Sections 195
and 709 of the Code;
          Any other election required or permitted to be made by the tax
partnership under the Code or any state tax law shall be made as determined by
the Management Committee.
          Each Participant shall elect under Section 617(a) of the Code to
deduct currently all exploration expenses. Each Participant reserves the right
to capitalize its share of development and/or exploration expenses of the tax
partnership in accordance with Section 59(e) of the Code, provided that a
Participant’s election to capitalize all or any portion of such expenses shall
not affect the Participant’s Capital Account.
          3.3 Allocations to Participants. Allocations for Capital Account
purposes shall be in accordance with the following:
               (a) The Participants recognize the provision for taking
production in kind, as provided elsewhere in the Agreement, as each
Participant’s right to determine a market for the sale of a proportionate share
of production subject to Subparagraph 3.3(h) below. All items of income, gain,
deduction, loss, credit or tax attribute arising from the sale and marketing of
such production shall be allocated to the Participant who designated such
market.
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               (b) Exploration expenses and development cost deductions shall be
allocated among the Participants in accordance with their respective
contributions to such expenses and costs.
               (c) Depreciation and amortization deductions with respect to a
depreciable Asset shall be allocated among the Participants in accordance with
their respective contributions to the adjusted basis of the Asset which gives
rise to the depreciation, amortization or loss deduction.
               (d) Production and operating cost deductions shall be allocated
among the Participants in accordance with their respective contributions to such
costs.
               (e) Deductions for depletion (to the extent of the amount of such
deductions that would have been determined for Capital Account purposes if only
cost depletion were allowable for federal income tax purposes) shall be
allocated to the Participants in accordance with their respective contributions
to the adjusted basis of the depletable property. Any remaining depletion
deductions shall be allocated to the Participants so that, to the extent
possible, the Participants receive the same total amounts of percentage
depletion as they would have received if percentage depletion were allocated to
the Participants in proportion to their respective shares of the gross income
used as the basis for calculating the federal income tax deduction for
percentage depletion.
               (f) Subject to Subparagraph 3.3(h) below, gross income on the
sale of production shall be allocated in accordance with the Participants’
rights to share in the proceeds of such sale.
               (g) Except as provided in Subparagraph 3.3(h) below, gain or loss
on the sale of a depreciable or depletable asset shall be allocated so that, to
the extent possible, the net amount reflected in the Participants’ Capital
Account with respect to such property (taking into account the cost of such
property, depreciation, amortization, depletion or other cost recovery
deductions and gain or loss) most closely reflects the Participants’
Participating Interests.
               (h) Gains and losses on the sale of all or substantially all the
Assets of the tax partnership shall be allocated so that, to the extent
possible, the Participants’ resulting Capital Account balances are in the same
ratio as their Participating Interests at the time of such sale.
               (i) {Intentionally Omitted.]
               (j) All deductions and losses that are not otherwise allocated in
this Paragraph shall be allocated among the Participants in accordance with
their
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respective contributions to the costs producing each such deduction or to the
adjusted basis of the Asset producing each such loss.
               (k) Any recapture of exploration expenses under Section
617(b)(1)(A) of the Code, and any disallowance of depletion under
Section 617(b)(1)(B) of the Code, shall be borne by the Participants in the same
manner as the related exploration expenses were allocated to, or claimed by,
them.
               (l) All other items of income and gain shall be allocated to the
Participants in accordance with their Participating Interests.
               (m) If a reduced Participating Interest is restored pursuant to
Section 9.6, the Manager shall endeavor to allocate items of income, gain, loss,
and deduction (in the same year as the restoration of such Participating
Interest or, if necessary, in subsequent years) so as to cause the Capital
Account balances of the Participants to be the same as they would have been if
the restored Participating Interest had never been reduced.
               (n) If the Participants’ Participating Interests change during
any taxable year of the tax partnership, the distributive share of items of
income, gain, loss and deduction of each Participant shall be determined in any
manner (1) permitted by Section 706 of the Code, and (2) agreed on by both
Participants. If the Participants cannot agree on a method, the method shall be
determined by the Manager in consultation with the tax partnership’s tax
advisers, with preference given to the interim closing-of-the-books method
except where application of that method would result in undue administrative
expense in relationship to the amount of the items to be allocated.
               (o) “Nonrecourse deductions,” as defined by Treas. Reg.
Section 1.704-2(b)(1) shall be allocated between the Participants in proportion
to their Participating Interests.
          3.4 Regulatory Allocations. Notwithstanding the provisions of
Paragraph 3.3 to the contrary, the following special allocations shall be given
effect for purposes of maintaining the Participants’ Capital Accounts.
               (a) If either Participant unexpectedly receives any adjustments,
allocations, or distributions described in Treas. Reg.
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704- 1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), which result in a deficit Capital Account balance,
items of income and gain shall be specially allocated to each such Participant
in an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Capital Account deficit of such Participant as quickly
as possible. For the purposes of this Paragraph, each Participant’s Capital
Account balances shall be increased by the sum of (i) the amount such
Participant is obligated to restore pursuant to any provision of the
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Agreement, and (ii) the amount such Participant is deemed to be obligated to
restore pursuant to the penultimate sentences of Treas. Reg.
Sections 1.704-2(g)(1) and 1.704-2(i)(5).
               (b) The “minimum gain chargeback” and “partner minimum gain
chargeback” provisions of Treas. Reg. Sections 1.704-2(f) and 1.704-2(i)(4),
respectively, are incorporated herein by reference and shall be given effect. In
accordance with Treas. Reg. Section 1.704-2(i)(1), deductions attributable to a
“partner nonrecourse liability” shall be allocated to the Participant that bears
the economic risk of loss for such liability.
               (c) If the allocation of deductions to either Participant would
cause such Participant to have a deficit Capital Account balance at the end of
any taxable year of the tax partnership (after all other allocations provided
for in this Article III have been made and after giving effect to the
adjustments described in Subparagraph 3.4(a)), such deductions shall instead be
allocated to the other Participant.
          3.5 Curative Allocations. The allocations set forth in Paragraph 3.4
(the “Regulatory Allocations”) are intended to comply with certain requirements
of the Treasury Regulations. It is the intent of the Participants that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of income,
gain, loss or deduction pursuant to this Paragraph. Therefore, notwithstanding
any other provisions of this Article III (other than the Regulatory
Allocations), the Manager shall make such offsetting special allocations of
income, gain, loss or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Participant’s Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Participant would have had if the Regulatory Allocations were not part of
this Agreement and all items were allocated pursuant to Paragraph 3.3 without
regard to Paragraph 3.4.
          3.6 Tax Allocations. Except as otherwise provided in this Paragraph,
items of taxable income, deduction, gain and loss shall be allocated in the same
manner as the corresponding item is allocated for book purposes under Paragraphs
3.3, 3.4 and 3.5 of the corresponding item determined for Capital Account
purposes.
               (a) Recapture of tax deductions arising out of a disposition of
property shall, to the extent consistent with the allocations for tax purposes
of the gain or amount realized giving rise to such recapture, be allocated to
the Participants in the same proportions as the recaptured deductions were
originally allocated or claimed.
               (b) To the extent required by Section 704(c) of the Code, income,
gain, loss, and deduction with respect to property contributed to the tax
partnership by a Participant shall be shared among both Participants so as to
take account of the variation between the basis of the property to the tax
partnership and its fair market value at the time of contribution. The
Participants intend that Section 704(c) shall effect no allocations
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of tax items that are different from the allocations under Paragraphs 3.3, 3.4
and 3.5 of the corresponding items for Capital Account purposes. However, to the
extent that allocations of tax items are required pursuant to Section 704(c) of
the Code to be made other than in accordance with the allocations under
Paragraphs 3.3, 3.4 and 3.5 of the corresponding items for Capital Account
purposes, Section 704(c) shall be applied in accordance with the “traditional
method without curative allocations” under Treas. Reg. Section 1.704-3(b).
               (c) Depletion deductions with respect to contributed property
shall be determined without regard to any portion of the property’s basis that
is attributable to precontribution expenditures by Canyon that were capitalized
under Code Sections 616(b), 59(e) and 291(b). Deductions attributable to
precontribution expenditures by Canyon shall be calculated under such Code
Sections as if Canyon continued to own the depletable property to which such
deductions are attributable, and such deductions shall be reported by the tax
partnership and shall be allocated solely to Canyon.
               (d) The Participants understand the allocations of tax items set
forth in this Paragraph, and agree to report consistently with such allocations
for federal and state tax purposes.
ARTICLE IV
CAPITAL ACCOUNTS; LIQUIDATION
          4.1 Capital Accounts.
               (a) A separate Capital Account shall be established and
maintained by the TMP for each Participant. Such Capital Account shall be
increased by (i) the amount of money contributed by the Participant to the tax
partnership, (ii) the fair market value of property contributed by the
Participant to the tax partnership (net of liabilities secured by such
contributed property that the partnership is considered to assume or take
subject to under Code Section 752) and (iii) allocations to the Participant
under Paragraphs 3.3, 3.4 and 3.5 of tax partnership income and gain (or items
thereof), including income and gain exempt from tax; and shall be decreased by
(iv) the amount of money distributed to the Participant by the tax partnership,
(v) the fair market value of property distributed to the Participant by the tax
partnership (net of liabilities secured by such distributed property and that
the Participant is considered to assume or take subject to under Code
Section 752), (vi) allocations to the Participant under Paragraphs 3.3, 3.4 and
3.5 of expenditures of the tax partnership not deductible in computing its
taxable income and not properly chargeable to a Capital Account, and
(vii) allocations of tax partnership loss and deduction (or items thereof),
excluding items described in (vi) above and percentage depletion to the extent
it exceeds the adjusted tax basis of the depletable property to which it is
attributable. The Participants agree that the net fair market value of the
property contributed by Canyon to the tax partnership pursuant to Section 5.1(a)
of the Agreement is Two Million Dollars ($2,000,000).
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               (b) In the event that the Capital Accounts of the Participants
are computed with reference to the book value of any Asset which differs from
the adjusted tax basis of such Asset, then the Capital Accounts shall be
adjusted for depreciation, depletion, amortization and gain or loss as computed
for book purposes with respect to such Asset in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv)(g).
               (c) In the event any interest in the tax partnership is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest, except as provided in Treasury
Regulation Section 1.704-1(b)(2)(iv)(1).
               (d) In the event property, other than money, is distributed to a
Participant, the Capital Accounts of the Participants shall be adjusted to
reflect the manner in which the unrealized income, gain, loss and deduction
inherent in such property (that has not been reflected in the Capital Accounts
previously) would be allocated among the Participants if there was a taxable
disposition of such property for the fair market value of such property (taking
Section 7701(g) of the Code into account) on the date of distribution. For this
purpose the fair market value of the property shall be determined as set forth
in Paragraph 4.2(a) below.
               (e) In the event the Management Committee designates a
Supplemental Business Agreement area within the Area of Interest as described in
Article XV of the Agreement, the Management Committee shall appropriately
segregate Capital Accounts to reflect that designation and shall make such other
modifications to the Agreement as are appropriate to reflect the manner of
administering Capital Accounts in accordance with the terms of this Exhibit C.
               (f) Canyon is contributing to the Agreement certain depletable
properties with respect to which Canyon currently has an adjusted tax basis
which may consist in part of depletable expenditures and in part of expenditures
capitalized under Code Sections 616(b), 291(b) and/or 59(e). For purposes of
maintaining the Capital Accounts, the tax partnership’s deductions with respect
to contributed property in each year for (i) depletion, (ii) deferred
development expenditures under Section 616(b) attributable to pre-contribution
expenditures, (iii) amortization under Section 291(b) attributable to
pre-contribution expenditures, and (iv) amortization under Section 59(e)
attributable to pre-contribution expenditures shall be the amount of the
corresponding item determined for tax purposes pursuant to Subparagraph 3.6(c)
multiplied by the ratio of (A) the book value at which the contributed property
is recorded in the Capital Accounts to (B) the adjusted tax basis of the
contributed property (including basis resulting from capitalization of
pre-contribution development expenditures under Sections 616(b), 291(b), and
59(e)).
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               (g) The foregoing provisions, and the other provisions of the
Agreement relating to the maintenance of Capital Accounts and the allocations of
income, gain, loss, deduction and credit, are intended to comply with Treasury
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Management Committee shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed in order to comply with such
Regulations, the Management Committee may make such modification, provided that
it is not likely to have a material effect on the amount distributable to either
Participant upon liquidation of the tax partnership pursuant to Paragraph 4.2.
               (h) If the Participants so agree, upon the occurrence of an event
described in Treas. Reg. Section 1.704-1(b)(2)(iv)(5), the Capital Accounts
shall be restated in accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(f) to
reflect the manner in which unrealized income, gain, loss or deduction inherent
in the assets of the tax partnership (that has not been reflected in the Capital
Accounts previously) would be allocated among the Participants if there were a
taxable disposition of such assets for their fair market values, as determined
in accordance with Section 4.2(a). For purposes of Paragraph 3.3, a Participant
shall be treated as contributing the portion of the book value of any property
that is credited to the Participant’s Capital Account pursuant to the preceding
sentence. Following a revaluation pursuant to this Subparagraph 4.1(h), the
Participants’ shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes, with respect to property that has been revalued
pursuant to this Subparagraph 4.1(h) shall be determined in accordance with the
principles of Code Section 704(c) as applied pursuant to the final sentence of
Subparagraph 3.6(b).
          4.2 Liquidation. In the event the partnership is “liquidated” within
the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g) then,
notwithstanding any other provision of the Agreement to the contrary, the
following steps shall be taken (after taking into account any transfers of
Capital Accounts pursuant to Sections 5.2(a), 6.3(a) or 12.3 of the Agreement):
               (a) The Capital Accounts of the Participants shall be adjusted to
reflect any gain or loss which would be realized by the partnership and
allocated to the Participants pursuant to the provisions of Article III of this
Exhibit C if the Assets had been sold at their fair market value at the time of
liquidation. The fair market value of the Assets shall be determined by
agreement of both Participants; provided, however, that in the event that the
Participants fail to agree on the fair market value of any Asset, its fair
market value shall be determined by a nationally recognized independent
engineering firm or other qualified independent party approved by both
Participants.
               (b) After making the foregoing adjustments and/or contributions,
all remaining Assets shall be distributed to the Participants in accordance with
the balances
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in their Capital Accounts (after taking into account all allocations under
Article III, including Subparagraph 3.3(h)). Unless otherwise expressly agreed
on by both Participants, each Participant shall receive an undivided interest in
each and every Asset determined by the ratio of the amount in each Participant’s
Capital Account to the total of both of the Participants’ Capital Accounts.
Assets distributed to the Participants shall be deemed to have a fair market
value equal to the value assigned to them pursuant to Subparagraph 4.2(a) above.
               (c) All distributions to the Participants in respect of their
Capital Accounts shall be made in accordance with the time requirements of
Treasury Regulation Sections 1.704-1(b)(2)(ii)(b)(2) and (3).
          4.3 Deemed Terminations. Notwithstanding the provisions of Paragraph
4.2, if the “liquidation” of the tax partnership results from a deemed
termination under Section 708(b)(1)(B) of the Code, then (i) Subparagraphs
4.2(a) and (b) shall not apply, (ii) the tax partnership shall be deemed to have
distributed its Assets in accordance with the relative Capital Account balances
of the Participants as adjusted pursuant to Subparagraph 4.2(a), (iii) the
Participants shall be deemed for tax purposes to have contributed those Assets
to a new partnership pursuant to the terms of this Exhibit, and (iv) the new tax
partnership shall continue pursuant to the terms of this Agreement and this
Exhibit.
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EXHIBIT D
To
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
By And Between
Canyon Resources Corporation
And
New Horizon Uranium Corporation
DEFINITIONS
     “Affiliate” means any person, partnership, limited liability company, joint
venture, corporation, or other form of enterprise which Controls, is Controlled
by, or is under common Control with a Participant.
     “Agreement” means this Converse Uranium Project Exploration, Development
and Mine Operating Agreement, including all amendments and modifications, and
all schedules and exhibits, all of which are incorporated by this reference.
     “Approved Alternative” means a Development and Mining alternative selected
by the Management Committee from various Development and Mining alternatives
analyzed in the Pre-Feasibility Studies.
     “Area of Interest” means the area described in Paragraph 1.3 of Exhibit A.
     “Assets” means the Properties, Products, Business Information, and all
other real and personal property, tangible and intangible, including existing or
after-acquired properties and all contract rights held for the benefit of the
Participants hereunder.
     “Budget” means a detailed estimate of all costs to be incurred and a
schedule of cash advances to be made by the Participants with respect to a
Program.
     “Business” means the contractual relationship of the Participants under
this Agreement.
     “Business Account” means the account maintained by the Manager for the
Business in accordance with Exhibit B.
     “Business Information” means the terms of this Agreement, and any other
agreement relating to the Business, the Existing Data, and all information,
data, knowledge
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and know-how, in whatever form and however communicated (including, without
limitation, Confidential Information), developed, conceived, originated or
obtained by either Participant in performing its obligations under this
Agreement. The term “Business Information” shall not include any improvements,
enhancements, refinements or incremental additions to Participant Information
that are developed, conceived, originated or obtained by either Participant in
performing its obligations under this Agreement.
     “Capital Account” means the account maintained for each Participant in
accordance with Exhibit C.
     “Confidential Information” means all information, data, knowledge and
know-how (including, but not limited to, formulas, patterns, compilations,
programs, devices, methods, techniques and processes) that derives independent
economic value, actual or potential, as a result of not being generally known
to, or readily ascertainable by, third parties and which is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy,
including without limitation all analyses, interpretations, compilations,
studies and evaluations of such information, data, knowledge and know-how
generated or prepared by or on behalf of either Participant. Confidential
Information does not include information within the public domain through no
fault or action taken of any party after the Effective Date of this Agreement.
     “Continuing Obligations” mean obligations or responsibilities that are
reasonably expected to continue or arise after Operations on a particular area
of the Properties have ceased or are suspended, such as future monitoring,
stabilization, or Environmental Compliance.
     “Control” used as a verb means, when used with respect to an entity, the
ability, directly or indirectly through one or more intermediaries, to direct or
cause the direction of the management and policies of such entity through
(i) the legal or beneficial ownership of voting securities or membership
interests; (ii) the right to appoint managers, directors or corporate
management; (iii) contract; (iv) operating agreement; (v) voting trust; or
otherwise; and, when used with respect to a person, means the actual or legal
ability to control the actions of another, through family relationship, agency,
contract or otherwise; and “Control” used as a noun means an interest which
gives the holder the ability to exercise any of the foregoing powers.
     “Cover Payment” shall have the meaning as set forth in Section 10.4 of the
Agreement.
     “Development” means all preparation (other than Exploration) for the
removal and recovery of Products, including pilot or test projects and
installation or construction of improvements to be used for Mining, and all
related Environmental Compliance.
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     “Effective Date” means the date set forth in the preamble to this
Agreement.
     “Encumbrance” or “Encumbrances” means mortgages, deeds of trust, security
interests, pledges, liens, net profits interests, royalties or overriding
royalty interests, other payments out of production, or other burdens of any
nature.
     “Environmental Compliance” means actions performed during or after
Operations to comply with the requirements of all Environmental Laws or
contractual commitments related to reclamation of the Properties or other
compliance with Environmental Laws.
     “Environmental Laws” means Laws aimed at reclamation or restoration of the
Properties; abatement of pollution; protection of the environment; protection of
wildlife, including endangered species; ensuring public safety from
environmental hazards; protection of cultural or historic resources; management,
storage or control of hazardous materials and substances; releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances as wastes into the environment, including without
limitation, ambient air, surface water and groundwater; and all other Laws
relating to the manufacturing, processing, distribution, use, treatment,
storage, disposal, handling or transport of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes.
     “Environmental Liabilities” means any and all claims, actions, causes of
action, damages, losses, liabilities, obligations, penalties, judgments, amounts
paid in settlement, assessments, costs, disbursements, or expenses (including,
without limitation, attorneys’ fees and costs, experts’ fees and costs, and
consultants’ fees and costs) of any kind or of any nature whatsoever that are
asserted against either Participant, by any person or entity other than the
other Participant, alleging liability (including, without limitation, liability
for studies, testing or investigatory costs, cleanup costs, response costs,
removal costs, remediation costs, containment costs, restoration costs,
corrective action costs, closure costs, reclamation costs, natural resource
damages, property damages, business losses, personal injuries, penalties or
fines) arising out of, based on or resulting from (i) the presence, release,
threatened release, discharge or emission into the environment of any hazardous
materials or substances existing or arising on, beneath or above the Properties
and/or emanating or migrating and/or threatening to emanate or migrate from the
Properties to off-site properties; (ii) physical disturbance of the environment;
or (iii) the violation or alleged violation of any Environmental Laws.
     “Equity Account” means the account maintained for each Participant by the
Manager in accordance with Subsection 8.2(n) of the Agreement.
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     “Existing Data” means maps, drill logs and other drilling data, core tests,
pulps, reports, surveys, assays, analyses, production reports, operations,
technical, accounting and financial records, and other material information
developed in operations on the Properties prior to the Effective Date.
     “Expansion” or “Modification” means (i) a material increase in mining or
production capacity; (ii) a material change in the recovery process; or (iii) a
material change in waste or tailings disposal methods. An increase or change
shall be deemed “material” if it is anticipated to cost more than ten percent
(10%) of original capital costs attributable to the Development of the mining or
production capacity, recovery process or waste or tailings disposal facility to
be expanded or modified.
     “Exploration” means all activities directed toward ascertaining the
existence, location, magnitude and extent, quantity, quality or commercial value
of deposits of Products, including but not limited to additional drilling
required after to evaluate potentially commercial mineralization, and including
related Environmental Compliance.
     “Feasibility Contractors” means one or more engineering firms approved by
the Management Committee for purposes of preparing or auditing any
Pre-Feasibility Study or Feasibility Study.
     “Feasibility Study” means a report to be prepared following selection by
the Management Committee of one or more Approved Alternatives. The Feasibility
Study shall include a review of information presented in any Pre-Feasibility
Studies concerning the Approved Alternative(s). The Feasibility Study shall be
in a form, of a scope, and at a level of accuracy generally acceptable to
reputable financial institutions that provide financing to the mining industry.
     “Governmental Fees” means all location fees, mining claim rental fees,
mining claim maintenance payments and similar payments required by Law to locate
and hold mining claims or leases.
     “Initial Contribution” means that contribution each Participant has made or
agrees to make pursuant to Section 5.1 of the Agreement.
     “Law” or “Laws” means all applicable federal, state and local laws
(statutory or common), rules, ordinances, regulations, grants, concessions,
franchises, licenses, orders, directives, judgments, decrees, and other
governmental restrictions, including permits and other similar requirements,
whether legislative, municipal, administrative or judicial in nature.
     “Management Committee” means the committee established under Article VII of
the Agreement.
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     “Manager” means the Participant appointed under Article VIII of the
Agreement to manage Operations, or any successor Manager.
     “Mining” means the mining whether by surface, underground, or in-situ
methods, extracting, producing, treating, handling, processing, removal and
stockpiling of Products.
     “Operations” means the activities carried out under this Agreement.
     “Participant” means Canyon or Horizon, or any permitted successor or assign
of Canyon or Horizon under the Agreement.
     “Participant Information” means all information, data, knowledge and
know-how, in whatever form and however communicated (including, without
limitation, Confidential Information but excluding the Existing Data), which, as
shown by written records, was developed, conceived, originated or obtained by a
Participant: (a) prior to entering into this Agreement, or (b) independent of
its performance under the terms of this Agreement.
     “Participating Interest” means the percentage interest representing the
ownership interest of a Participant in the Assets, and all other rights and
obligations arising under this Agreement, as such interest may from time to time
be adjusted hereunder. Participating Interests shall be calculated to three
decimal places and rounded to two decimal places as follows: Decimals of .005 or
more shall be rounded up (e.g., 1.519% rounded to 1.52%); decimals of less than
.005 shall be rounded down (e.g., 1.514% rounded to 1.51%). The initial
Participating Interests of the Participants are set forth in Section 6.1 of the
Agreement.
     “Payout” means the date on which the Equity Account balance of each of the
Participants has become zero or a negative number, regardless of whether the
Equity Account balance of either or both Participants subsequently becomes a
positive number. If one Participant’s Equity Account balance becomes zero or a
negative number before the other Participant’s, Payout shall not occur until the
date that the other Participant’s Equity Account balance first becomes zero or a
negative number.
     “Pre-Feasibility Studies” means one or more studies prepared to analyze
whether economically viable Mining Operations may be possible on the Properties,
as described in Section 9.8.
     “Prime Rate” means the interest rate quoted and published as “Prime” as
published in The Wall Street Journal, under the heading “Money Rate,” as the
rate may change from day to day.
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     “Products” means all ores, minerals and mineral resources produced from the
Properties, including but not limited to all uranium, vanadium, other
fissionable source materials, other spatially associated minerals, and all forms
of U3O8 in resins, solutions, concentrates, or yellowcake, but shall not include
any oil, gas, associated liquid hydrocarbons or coal.
     “Program” means a description in reasonable detail of Operations to be
conducted and objectives to be accomplished by the Manager for a period
determined by the Management Committee.
     “Program Period” means the time period covered by an adopted Program and
Budget.
     “Project Financing” means any financing approved by the Management
Committee and obtained by the Participants for the purpose of placing a mineral
deposit situated on the Properties into commercial production, but shall not
include any such financing obtained individually by either Participant to
finance payment or performance of its obligations under the Agreement.
     “Properties” means those interests in real property described in
Paragraph 1.1 of Exhibit A and all other interests in real property within the
Area of Interest that are acquired and held subject to the Agreement.
     “Recalculated Participating Interest” means the reduced Participating
Interest of a Participant as recalculated under Sections 9.5, 9.6 or 10.5 of the
Agreement.
     “Reduced Participant” means a Participant whose Participating Interest is
reduced under Sections 9.5 or 10.5 of the Agreement.
     “Transfer” means, when used as a verb, to sell, grant, assign, create an
Encumbrance, pledge or otherwise convey, or dispose of or commit to do any of
the foregoing, or to arrange for substitute performance by an Affiliate or third
party (except as permitted under Subsection 8.2(j) and Section 8.6 of the
Agreement), either directly or indirectly; and, when used as a noun, means such
a sale, grant, assignment, Encumbrance, pledge or other conveyance or
disposition, or such an arrangement.
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EXHIBIT E
To
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
By And Between
Canyon Resources Corporation
And
New Horizon Uranium Corporation
PRODUCTION ROYALTY
Production Royalty, as defined in Section 6.3(a) of the Agreement to which this
Exhibit E is attached, shall be determined and paid in accordance with the
following terms and conditions, which terms and conditions shall be set forth in
any royalty deed delivered pursuant to Section 6.3(a). For purposes of this
Exhibit E: (a) the term “Grantor” shall mean the Participant that is responsible
for paying Production Royalty; (b) the term “Grantee” shall mean the person or
entity to whom the Production Royalty is granted and paid; and (c) all other
defined terms shall have the meaning given to them in the Agreement or in
Exhibit D attached to the Agreement.
     1. Reservation of Production Royalty. Upon Grantee’s conversion to a
Production Royalty and Grantee’s conveyance of all of its right, title and
interest in the Assets to Grantor in accordance with Section 6.3(a), Grantee
shall reserve a royalty in the amount of three percent (3%) of the Net Returns
from the sale or other disposition of all Products mined or produced from the
Properties.
     2. Computation of Production Royalty. Grantor shall calculate the Net
Returns realized on the sale of all Products mined or produced from the
Properties and sold or otherwise disposed of (with or without sale) by or for
Grantor by subtracting Allowable Deductions from Gross Sales Revenue. The
Production Royalty payable to Grantee shall be the amount of the Net Returns so
calculated multiplied by three percent (3%). Grantee shall have no right
whatsoever to take Products “in kind.”
     3. Definitions. For purposes of this Exhibit E:

  a.   “Allowable Deductions” has the meaning given to it in Paragraph 4, below;
    b.   “Gross Sales Revenue” shall mean the gross revenue received by or on
behalf of Grantor from the sale or other disposition (with or without sale) of
Products. Gross Sales Revenue shall be determined on a weighted average basis
when Grantor receives more than one

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      price for Products sold or otherwise disposed of during the period for
which Production Royalty is payable;     c.   “Net Returns” means an amount
determined by subtracting Allowable Deductions from Gross Sales Revenue; and    
d.   “Products” means all ores, minerals and mineral resources produced from the
Properties, including but not limited to all uranium, vanadium, other
fissionable source materials, other spatially associated minerals, and all forms
of U3O8 in resins, solutions, concentrates, or yellowcake, but shall not include
any oil, gas, associated liquid hydrocarbons or coal.

     4. Allowable Deductions.
          a. For Products that are uranium-bearing, “Allowable Deductions” shall
mean and include all of the following:
     i. all costs, expenses and charges of any nature whatsoever that are paid
or incurred by Grantor for or in connection with the transportation of Products
away from the Properties to the point of treatment, recovery, processing,
storage or sale;
     ii. all deductions made by the purchaser or processor for moisture,
impurities, sampling, assaying, penalties, and treatment or tolling charges or
fees;
     iii. all costs, expenses and charges of any nature whatsoever that are paid
or incurred by Grantor for or in connection with insurance, storage,
representation at a treatment, recovery, processing plant, or for consignment
sale or sales brokerage costs or fees;
     iv. all rentals and royalties of any kind payable to surface or mineral
interest owners or to the United States; and
     v. all federal, state and local sales, use, severance, net proceeds of
mine, excise, privilege and any other taxes, except income tax paid or incurred
by Grantor, which is levied on, measured by, or applicable to mineral production
or the value of Products produced from the Properties.
          b. For Products that are not uranium-bearing, “Allowable Deductions”
shall mean and include all of the following:
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     i. all costs, expenses and charges of any nature whatsoever that are paid
or incurred by Grantor for or in connection with the transportation of Products
away from the Properties to a mill, smelter, refinery, recovery plant or other
point of treatment, recover, processing, storage or sale;
     ii. all costs, expenses and charges of any nature whatsoever that are paid
or incurred by Grantor for or in connection with mineral concentration,
treatment, smelting, refining or other beneficiation processes or procedures
(whether or not currently known) which are undertaken off of the Properties,
including without limitation costs, expenses and charges paid or incurred for or
in connection with moisture, impurities, sampling, assaying, penalties, umpire
services and other processor deductions;
     iii. all costs, expenses and charges of any nature whatsoever that are paid
or incurred by Grantor for or in connection with insurance, storage,
representation at a mill, smelter, refinery, recovery or treatment plant, or for
consignment sale or sales brokerage costs or fees;
     iv. all rentals and royalties of any kind payable to surface or mineral
interest owners or to the United States; and
     v. all federal, state and local sales, use, severance, net proceeds of
mine, excise, privilege and any other taxes, except income tax paid or incurred
by Grantor, which is levied on, measured by, or applicable to mineral production
or the value of Products produced from the Properties.
     5. Treatment and Sale. Grantor shall have the right to concentrate, mill,
smelt, refine, upgrade or otherwise recover, treat, process or beneficiate
Products mined from the Properties at locations on or off the Properties. In the
event that Products are concentrated, milled, smelted, refined, upgraded or
otherwise recovered, treated, processed or beneficiated in facilities owned or
controlled by Grantor (whether on or off the Properties), then Allowable
Deductions shall not exceed Allowable Deductions that would have been paid or
incurred by Grantor if the facilities were owned or controlled by an independent
party. No Production Royalty shall be payable to Grantee for or with respect to
reasonable quantities of Products that are not sold by Grantor but are used by
Grantor for assaying, treatment amenability, metallurgical or other analytical
processes or procedures.
     6. Statements and Payments. (a) Payment of Production Royalty shall be made
by wire transfer within thirty (30) calendar days after the calendar quarter in
which Gross Sales Revenue is received by or on behalf of Grantor. Payment shall
be
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made to an account for the credit of Grantee at a bank designated from time to
time in writing by Grantee. At the time of each payment of Production Royalty,
Grantor shall deliver to Grantee a statement setting forth in detail all
pertinent facts and figures relevant to and supporting the calculation and
payment of Production Royalty, including without limitation: (i) the form,
weight and analysis of all Products for which Gross Sales Revenue was received
during the period for which payment of Production Royalty is made; (ii) the
price received for all Products from all purchasers thereof during such period;
and (iii) an itemized statement of all Allowable Deductions, such that Grantee
may verify the accuracy of the amount of the payment.
          (b) All statements provided to Grantee by Grantor shall be
conclusively presumed to be true and correct after twenty-four (24) months
following the calendar year during which such statement was received by Grantee,
unless Grantee submits a written exception to Grantor within such twenty-four
(24) month period. All written exceptions and claims upon Grantor for incorrect
payments of Production Royalty shall be made within such twenty-four (24) month
period or shall be deemed waived.
     7. Audits. Grantee shall have the right to an independent audit of all
books, records and accounts relating to the calculation and payment of
Production Royalty. Such audit shall review all issues raised by Grantee in any
notice given by Grantee pursuant to Paragraph 7(a) above. All costs of such
audit shall be borne by Grantee. Grantee shall give Grantor thirty (30) days
prior notice of such audit. Any audit conducted on behalf of Grantee shall be
made during Grantor’s normal business hours and shall not interfere with the
business and operations of Grantor. Grantee shall not have the right to audit
the books, records and accounts of Grantor relating to the calculation and
payment of Production Royalty more than twenty-four (24) months after the
calendar year during which the payment of Production Royalty (or the statement
provided by Grantor in connection with such payment) was received. All written
exceptions to and claims upon Grantor for discrepancies disclosed by such audit
shall be made by Grantee not more than three (3) months after completion and
delivery of such audit, or they shall be deemed waived.
     8. Adjustments. The amounts of any charges, costs or expenses or any
adjustments which are actually made and given to Grantor by a purchaser,
shipper, processor or other creditor that were not taken into account in a
statement to Grantee which accompanied a preceding payment of Production Royalty
shall be taken into account in determining the amount of the next Production
Royalty payment, but no such charges or adjustments shall otherwise affect the
conclusiveness of preceding statements or payments.
     9. Lesser Interest. If it is finally determined that Grantor owns an
interest in the Properties which is less than the entire and undivided mineral
estate therein,
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whether or not such lesser interest is referred to herein, then the Production
Royalty provided for herein shall be paid to Grantee only in the proportion to
which Grantor’s interest bears to the whole and undivided mineral estate.
Grantee shall be entitled to retain only that portion of the Production Royalty
previously paid to Grantee hereunder as Grantor’s actual interest in the mineral
estate bears to the whole and undivided mineral estate. In no case shall Grantee
be required to refund or return any Production Royalty previously paid to it
which exceeds the amount of Production Royalty to which Grantee was actually
entitled. Instead, Grantor’s sole remedy shall be to offset all moneys
previously paid Grantee that exceeded the actual amounts due Grantee against
future Production Royalty which later becomes due and payable to Grantee, if
any. With respect to any portion of the Properties in which Grantee owns no
right, title, or interest in the Products, Grantor is under no obligation to
pay, and Grantee has no right to receive, any Production Royalty.
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EXHIBIT F
To
CONVERSE URANIUM PROJECT
EXPLORATION, DEVELOPMENT AND MINE OPERATING AGREEMENT
By And Between
Canyon Resources Corporation
And
New Horizon Uranium Corporation
INITIAL PROGRAM AND BUDGET

          2006       Item   $       
Initial 43-101 Property Report
    10,000  
Landman, acquisition of private fee land
    20,000  
Environmental Assessment
    15,000  
Exploration permit including reclamation bonding
    25,000  
Environmental Compliance Fund
    25,000  
Drilling — 30 holes to 750 ft avg. – total 22,500 ft
    225,000  
Drilling results analysis
    10,000  
Drilling Report (43-101 compliant by 3rd party)
    25,000            
 
       
2006 Total
    355,000            

 

*  All rotary drilling @$10.00 per ft.

EXHIBIT F
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