Exhibit 10.1
 

 
 
LIMITED LIABILITY COMPANY AGREEMENT
 
BETWEEN
 
CORE ALASKA, LLC AND ROYAL ALASKA, LLC
 
FOR
 
PEAK GOLD, LLC
 
DATED: JANUARY 8, 2015
 
 
 

--------------------------------------------------------------------------------

 
 
TABLE OF CONTENTS

    Page       ARTICLE I       DEFINITIONS
1
 
ARTICLE II      REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
7
 
    2.1
Capacity of Members
7
 
    2.2
Additional Representations and Warranties of CORE
7
 
    2.3
Survival
9
 
    2.4
Record Title
9
 
    2.5
Loss of Title
9
 
ARTICLE III     NAME, PURPOSES AND TERM
9
 
    3.1
General
9
 
    3.2
Name
9
 
    3.3
Purposes
10
 
    3.4
Limitation
10
 
    3.5
Effective Date and Term
10
 
    3.6
Registered Agent; Offices
10
 
ARTICLE IV     RELATIONSHIP OF THE MEMBERS
10
 

    4.1
No State-Law Partnership
10
 
    4.2
Federal Tax Elections and Allocations
10
 
    4.3
State Income Tax
11
 
     4.4
Tax Returns
11
 
    4.5
Other Business Opportunities
11
 
    4.6
Waiver of Right to Partition
11
 
    4.7
Transfer of Membership Interests
11
 
    4.8
Implied Covenants; No Additional Duties
11
 
    4.9
Liabilities; Indemnification
11
 
ARTICLE V     CONTRIBUTIONS BY MEMBERS
13
 
    5.1
Members’ Initial Contributions
13
 
    5.2
Royal Resignation Prior to Making Earn In Contributions
14
 
    5.3
Additional Cash Contributions/Joint Funding Period
14
 
    5.4
No Right to Return of Contributions
15
 
ARTICLE VI     PERCENTAGE INTERESTS
15
 

 
 
-i-

--------------------------------------------------------------------------------

 
 
TABLE OF CONTENTS
(continued)

    Page      
    6.1
Initial Percentage Interests
15
 
    6.2
Changes in Percentage Interests
15
 
    6.3
Election Not to Make Capital Contribution; Voluntary Reduction in Percentage
Interest; Buyout
15
 
    6.4
Default in Making Contributions
16
 
    6.5
Continuing Obligations and Liabilities
17
 
    6.6
Grant of Security Interest
17
 
ARTICLE VII        MANAGEMENT COMMITTEE
18
 
    7.1
Organization and Composition
18
 
    7.2
Voting; Decisions
18
 
    7.3
Meetings
20
 
    7.4
Action Without Meeting
21
 
    7.5
Matters Requiring Approval
21
 
ARTICLE VIII       MANAGER
22
 
    8.1
Appointment
22
 
    8.2
Powers and Duties of Manager
22
 
    8.3
Standard of Care
25
 
    8.4
Resignation; Deemed Offer to Resign
25
 
    8.5
Payments To Manager
26
 
    8.6
Transactions With Affiliates
26
 
    8.7
Information Rights; Audits and Site Visits
26
 
ARTICLE IX          PROGRAMS AND BUDGETS
27
 
    9.1
Initial Program and Budget
27
 
    9.2
Operations Pursuant to Programs and Budgets
27
 
    9.3
Presentation of Programs and Budgets
27
 
    9.4
Review and Approval of Proposed Programs and Budgets
28
 
    9.5
Election to Participate During Joint Funding Period
28
 
    9.6
Budget Overruns; Program Changes
28
 
    9.7
Emergency or Unexpected Expenditures
28
 
ARTICLE X          ACCOUNTS AND SETTLEMENTS
29
 

 
 
-ii-

--------------------------------------------------------------------------------

 
 
TABLE OF CONTENTS
(continued)

    Page      
    10.1
Monthly Statements
29
 
    10.2
Capital Calls
29
 
    10.3
Failure to Meet Capital Calls
29
 
ARTICLE XI         DISTRIBUTIONS; DISPOSITION OF PRODUCTION
29
 
    11.1
Distributions
29
 
    11.2
Disposition of Production; No Distributions In Kind
29
 
ARTICLE XII        DISSOLUTION OF THE COMPANY AND RESIGNATION OF A MEMBER
29
 
    12.1
Dissolution
29
 
    12.2
Resignation
30
 
    12.3
Liquidation and Termination After Dissolution
30
 
    12.4
Non-Compete Covenants
30
 
    12.5
Right to Data After Termination
31
 
    12.6
Continuing Authority
31
 
ARTICLE XIII       ACQUISITIONS WITHIN AREA OF INTEREST
31
 
    13.1
General
31
 
    13.2
Notice to Non-Acquiring Member
31
 
    13.3
Option Exercised
31
 
    13.4
Option Not Exercised
32
 
ARTICLE XIV       ABANDONMENT AND SURRENDER OF PROPERTIES
32
 
    14.1
Surrender or Abandonment of Property
32
 
    14.2
Reacquisition
32
 
ARTICLE XV        TRANSFER OF INTEREST
32
 
    15.1
General
32
 
    15.2
Limitations on Free Transferability
32
 
    15.3
Transfer Provisions
34
 
ARTICLE XVI       DISPUTES
34
 
    16.1
Dispute Resolution
34
 
    16.2
Forum Selection
34
 
ARTICLE XVII     CONFIDENTIALITY
34
 

 
 
-iii-

--------------------------------------------------------------------------------

 
 
TABLE OF CONTENTS
(continued)

    Page      
    17.1
General
34
 
    17.2
Exceptions
34
 
    17.3
Limitations
35
 
    17.4
Public Announcements
35
 
    17.5
Duration of Confidentiality
35
 
ARTICLE XVIII     GENERAL PROVISIONS
36
 
    18.1
Notices
36
 
    18.2
Interpretation
36
 
    18.3
Currency
37
 
    18.4
Headings
37
 
    18.5
Waiver
37
 
    18.6
Modification
37
 
    18.7
Force Majeure
37
 
    18.8
Governing Law
37
 
    18.9
Rule Against Perpetuities
37
 
    18.10
Further Assurances
38
 
    18.11
Survival of Terms and Conditions
38
 
    18.12
No Third Party Beneficiaries
38
 
    18.13
Entire Agreement; Successors and Assigns
38
 

 
 
-iv-

--------------------------------------------------------------------------------

 
 
EXHIBITS

A           ASSETS AND AREA OF INTEREST

B           ACCOUNTING PROCEDURE

C           TAX MATTERS

D           INSURANCE

E           TRANSFER PROVISIONS

Schedule 5.1(a)               Allocation of Contributed Assets

 
 

--------------------------------------------------------------------------------

 
 
LIMITED LIABILITY COMPANY AGREEMENT
 
OF
 
PEAK GOLD, LLC
 
This Limited Liability Company Agreement of Peak Gold, LLC (this “Agreement”) is
made as of January 8, 2015 (the “Effective Date”) between Core Alaska, LLC, a
Delaware limited liability company (“CORE”), and Royal Alaska, LLC, a Delaware
limited liability company (“Royal”).
 
RECITALS
 
A.           As of the Effective Date, CORE owns or controls, directly or
indirectly, the Contributed Assets (including the Properties described in Part 1
of Exhibit A).
 
B.           Royal wishes to participate with CORE in the Operations, including
the exploration, evaluation, development and mining of mineral resources within
the Properties and any other properties acquired by the Company pursuant to the
terms of this Agreement.
 
C.           CORE and Royal wish to form and operate a limited liability company
to own the Assets (including the Properties) or any other properties or other
assets acquired by the Company pursuant to the terms of this Agreement and
conduct Operations as contemplated by this Agreement.
 
In consideration of the representations, warranties, covenants and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
CORE and Royal agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
The following capitalized terms shall have the following meanings whenever used
in this Agreement (including in the recitals hereto):
 
“Accounting Procedure” means the procedures set forth in Exhibit B.
 
“Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et
seq., as it may be amended.
 
“Affiliate” means any person, partnership, limited liability company, joint
venture, corporation or other form of enterprise which directly or indirectly
Controls, is Controlled by, or is under common Control with, a Member.
 
“Agreement” means this Limited Liability Company Agreement, including all
amendments and modifications hereof, and all schedules and exhibits, which are
incorporated herein by this reference.
 
“Area of Interest” means the area described in Part 2 of Exhibit A.
 
 
 

--------------------------------------------------------------------------------

 
 
“Assets” means the Properties, Products and all other real and personal
property, tangible and intangible, held by the Company.
 
“Attributable Share” has the meaning given in Section 6.3.
 
“Avalon” means Avalon Development Corporation, an Alaska corporation.
 
“Avalon Agreement” means the Amended and Restated Personal Services Agreement,
dated November 1, 2010, between Contango ORE, Inc. and Avalon.
 
“Avalon Data” means any Existing Data referred to in Section 14 of the Avalon
Agreement.
 
“Budget” means a detailed estimate of all costs to be incurred by the Company
with respect to a Program and a schedule of cash advances to be made by the
Members (or either of them) with respect to such Program.
 
“Budget Overrun” has the meaning given in Section 9.6.
 
“Business Account” means the account maintained in accordance with the
Accounting Procedure.
 
“Buyout Factor” has the meaning given in Section 6.3(d)(iii).
 
“Buyout Purchase Price” has the meaning given in Section 6.3(c).
 
“Capital Account” means the capital account maintained for each Member in
accordance with Treas. Reg. § 1.704-1(b)(2)(iv).
 
“Capital Contribution” has the meaning given in Section 5.3.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to
time.  Any reference herein to a specific section or sections of the Code shall
be deemed to include a reference to any corresponding provision of future Law.
 
“Company” means Peak Gold, LLC, the Delaware limited liability company governed
by this Agreement.
 
“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 Member, the Manager or the Company.
 
“Construction” has the meaning set forth in Subparagraph 2.13(b)(ii) of Exhibit
B.
 
 
2

--------------------------------------------------------------------------------

 
 
“Continuing Obligations” means 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.
 
“Contributed Assets” means the Assets described in Part 1 of Exhibit A as of the
Effective Date.
 
“Control” (i) when 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 (1) the legal or beneficial ownership of voting securities or membership
interests; (2) the right to appoint managers, directors or corporate management;
(3) contract; (4) operating agreement; (5) 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 agency, contract or otherwise; and (ii) when used as
a noun means an interest which gives the holder the ability to exercise any of
the foregoing powers.
 
“CORE” has the meaning given in the preamble to this Agreement.
 
“Designate” has the meaning given in Section 7.1.
 
“Development” means all preparation for the removal and recovery of Products,
including the construction or installation of a mill or any other infrastructure
and improvements to be used for on in connection with the mining, handling,
milling, processing or other beneficiation of Products.
 
“Dollar Value Per Basis Point” has the meaning given in Section 6.3(d)(iv).
 
“Earn In Contributions” has the meaning given in Section 5.1(b)(ii).
 
“Earn In Period” has the meaning given in Section 5.1(b).
 
“Electing Member” has the meaning given in Section 6.3(a).
 
“Electing Member Attributable Share of Current Capital Call” has the meaning
given in Section 6.3(d)(i).
 
“Electing Member Post Funding Percentage Interest” has the meaning given in
Section 6.3(d)(ii).
 
“Environmental Compliance” means action 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.
 
 
3

--------------------------------------------------------------------------------

 
 
“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
release 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 the Company, either Member or the Manager, by any person or entity other
than the other Member, 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) obligations under or the violation or alleged violation of any
Environmental Laws.
 
“Existing Data” has the meaning given in Section 2.2(b).
 
“Expenditure or Obligation” has the meaning given in Section 7.2(c)(xviii).
 
“Exploration” means all activities directed toward ascertaining the existence,
location, quantity, quality or commercial value of deposits of Products.
 
“GAAP” means generally accepted accounting principles in the United States,
consistently applied.
 
“Governmental Authority” means any supranational, national, state, municipal,
local or foreign government , including, where applicable, Tetlin, and any
instrumentality, subdivision, court, administrative agency or commission or
other governmental authority, or any quasi-governmental or private body
exercising any regulatory or other governmental or quasi-governmental authority.
 
“Governmental Fees” means all location fees, mining claim rental fees, mining
claim maintenance payments and similar payments required by Law to locate and
hold unpatented mining claims.
 
“Initial Contribution” means the Capital Contribution each Member has made or
agrees to make as of the Effective Date pursuant to Section 5.1(a) (for CORE)
Section 5.1(b)(i) (for Royal).
 
“Joint Funding Period” has the meaning given in Section 5.3.
 
 
4

--------------------------------------------------------------------------------

 
 
“Knowledge” means, with respect to CORE, the actual knowledge of Brad Juneau and
Curt Freeman, President of Avalon.
 
“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 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.
 
“Legal Proceeding” has the meaning given in Section 7.2(c)(xxi).
 
“Liens” has the meaning given in the Master Agreement.
 
“Management Committee” means the committee established under Article VII.
 
“Manager” means the person or entity appointed under Article VIII from time to
time as the manager of the Company.
 
“Master Agreement” means that certain Master Agreement, between Contango ORE,
Inc. and Royal Gold, Inc., dated September 29, 2014.
 
“Material Contract” means any contract entered into by the Manager for the
Company involving payment or revenues of more than $100,000 per annum.
 
“Member” and “Members” mean CORE and Royal and any other person or entity
admitted as a substituted or additional Member of the Company under this
Agreement.
 
“Membership Interest” means, with respect to any Member:  (i) that Member’s
status as a Member; (ii) that Member’s Capital Account and share of the profits,
losses and other items of income, gain, loss, deduction and credits of, and the
right to receive distributions (liquidating or otherwise) from the Company under
the terms of this Agreement; (iii) all other rights, benefits and privileges
enjoyed by that Member in its capacity as a Member, including that Member’s
rights to vote, consent and approve those matters described in this Agreement;
and (iv) all obligations, duties and liabilities imposed on that Member under
this Agreement in its capacity as a Member.
 
“Mining” means the mining, extracting, producing, handling, milling or other
processing of Products.
 
“Operations” means the activities carried out by the Company under this
Agreement.
 
“Percentage Interest” means the percentage interest of a Member in certain
allocations of profits and losses and other items of income, gain, loss or
deduction and certain distributions of cash or property, representing the
Membership Interest of such Member, as such interest may from time to time be
adjusted hereunder.  Percentage Interests shall be calculated to three decimal
places and rounded to two (e.g., 1.519% rounded to 1.52%).  Decimals of .005 or
more shall be rounded up to .01, decimals of less than .005 shall be rounded
down.
 
 
5

--------------------------------------------------------------------------------

 
 
“Permitted Liens” has the meaning given in the Master Agreement.
 
“Person” means any natural or juridical person, as the context requires.
 
“Phase I Earn-In Contributions” has the meaning given in Section 5.1(b)(ii)(1).
 
“Phase II Earn-In Contributions” has the meaning given in Section 5.1(b)(ii)(2).
 
“Phase III Earn-In Contributions” has the meaning given in
Section 5.1(b)(ii)(3).
 
“Post Funding Percentage Interest” has the meaning given in Section 6.3.
 
“Prime Rate” means the interest rate quoted as “Prime” as published in The Wall
Street Journal, under the heading “Money Rates”, as such rate may change from
day to day.
 
“Products” means all ores, minerals and mineral resources produced from the
Properties under this Agreement, in whatever form, including concentrate, dore
and precipitate.
 
“Program” means a description in reasonable detail of Operations to be conducted
and objectives to be accomplished by the Manager for a year or any longer
period.
 
“Project” means the Exploration, Development, Mining and other Operations to be
conducted by the Company relative to the Properties and pursuant to this
Agreement.
 
“Properties” means those mineral rights and other interests in real property
described in Part 1 of Exhibit A and all other mineral rights and other
interests in real property within the Area of Interest which are acquired and
held subject to this Agreement.
 
“Royal” has the meaning given in the preamble to this Agreement.
 
“Tetlin” means the Native Village of Tetlin, a federally recognized Indian tribe
organized pursuant to the Indian Reorganization Act, 25 U.S.C. §476, under a
Constitution and By-laws approved on May 15, 1939, and ratified on March 20,
1940 a/k/a the Tribe of Tetlin, Tetlin Tribal Council and Tetlin Village
Council.
 
“Tetlin Estoppel” has the meaning given in the Master Agreement.
 
“Tetlin Lease” means that certain Mineral Lease, dated July 15, 2008, as amended
by Amendment No. 1 to Mineral Lease dated as of October 1, 2009, Amendment No. 2
to Mineral Lease dated as of June 1, 2011, Amendment No. 3 to Mineral Lease
dated as of July 1, 2011, Amendment No. 4 to Mineral Lease dated as of
December 3, 2012, and Amendment No. 5 to Mineral Lease dated as of April 1,
2013, for which a Memorandum of Mineral Lease was recorded on September 19, 2008
in the records of the Fairbanks Recording District:  401, State of Alaska, as
document number 2008-019032-0.
 
 
6

--------------------------------------------------------------------------------

 
 
“Tetlin Stability Agreement” has the meaning given in the Master Agreement.
 
“Transfer” means, when used as a verb, to sell, grant, assign, encumber, pledge
or otherwise convey or dispose of or to commit to do any of the foregoing and,
when used as a noun, means such a sale, grant, assignment, encumbrance, pledge
or other conveyance or disposition, or such an arrangement.
 
“Treasury Regulations” or “Treas. Regs.” means regulations issued by the United
States Department of Treasury under the Code.  Any reference herein to a
specific section or sections of the Treasury Regulations shall be deemed to
include a reference to any corresponding provision of future regulations under
the Code
 
“Voluntary Reduction In Percentage Interest” has the meaning given in
Section 6.3(b).
 
ARTICLE II
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
 
2.1           Capacity of Members.  As of the Effective Date, each of the
Members represents and warrants as follows:
 
(a)           it is duly organized and in good standing in its state of
formation and is qualified to do business and is in good standing in those
states where necessary in order to carry out the purposes of this Agreement;
 
(b)           it has the capacity to enter into and perform this Agreement and
all transactions contemplated herein and that all 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; and
 
(d)           this Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms, enforceable against it
in accordance with its terms, except as such enforceability may be affected by
applicable bankruptcy, reorganization, insolvency, moratorium, or similar Laws
affecting creditors’ rights generally, or by general principles of equity.
 
2.2           Additional Representations and Warranties of CORE.  As of the
Effective Date, CORE makes the following representations and warranties to
Royal:
 
(a)           Leases and Other Contracts.  With respect to those Properties in
which CORE holds an interest under leases or other contracts:  (i) CORE is in
exclusive possession of such Properties (subject to Permitted Liens and, in
respect of the Tetlin Lease, to the rights of Tetlin thereunder) and has full
authority thereunder to perform its obligations under this Agreement in respect
thereof; (ii) CORE has not received any notice of, and has no Knowledge of, any
default of any of the terms or provisions of such leases or other contracts;
(iii) CORE has the authority under such contracts to perform fully its
obligations under this Agreement; (iv) to the Knowledge of CORE, such contracts
are valid and in good standing; and (v) the Properties covered thereby are free
and clear of all defects and Liens arising by, through or under CORE.
 
 
7

--------------------------------------------------------------------------------

 
 
(b)           Existing Data.  CORE has delivered or made available to
Royal:  (i) all information concerning title to the Properties, (ii) all maps,
drill logs and other drilling data, (iii) all core tests and pulps, (iv) all
reports, surveys, assays and analyses, (v) all operations, technical, accounting
and financial records, and (vi) other all material information developed in
Operations prior to the Effective Date, in CORE’s possession or control
(including as are in the possession of Avalon), including, but not limited to,
true and correct copies of all leases or other contracts relating to the
Properties (the “Existing Data”).  CORE owns the Avalon Data free clear of any
Lien.  The Avalon Data does not, and the contribution by CORE of the Existing
Data (including the Avalon Data) to the Company, and the use by the Company
thereof, will not, infringe the intellectual property rights of Avalon or any
other Person.
 
(c)           Claims.  With respect to unpatented mining claims located by or on
behalf of CORE (or Au CORE) that are included within the Properties, except as
provided in Part 1 of Exhibit A and subject to the paramount title of the State
of Alaska or the United States (as applicable):  (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 for the
current assessment year has been performed in a manner consistent with that
which would be required of the Manager pursuant to Section 8.2(k) of this
Agreement through the current assessment year; (v) all affidavits of assessment
work 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 defects and Liens arising by,
through or under CORE; and (vii) CORE has no Knowledge of conflicting
claims.  With respect to those unpatented mining claims that were not located by
CORE or an Affiliate of CORE, but are included within the Properties, CORE makes
the foregoing representations and warranties (with the foregoing exceptions) to
its Knowledge.
 
(d)           Compliance With Laws.  CORE and its Affiliates, and to the
Knowledge of CORE, its predecessors in title in respect of the Contributed
Assets, have complied with all Laws, including, without limitation,
Environmental Laws, in connection with the acquisition, ownership, development
and maintenance of the Contributed Assets, including, without limitation, the
Tetlin Lease, and in the conduct of its and their business in respect of the
same.
 
(e)           Investigations.  CORE has not received any written notice from any
Governmental Authority of a pending investigation or alleging the violation of
any Laws, including, without limitation, Environmental Laws, with respect to the
Properties or any other Contributed Assets.
 
(f)           Litigation.  With respect to the Properties, there are no pending,
or to CORE’s Knowledge, any threatened, actions, suits, claims or proceedings.
 
(g)           Liens.  To the Knowledge of CORE, there are no Liens encumbering
the Contributed Assets other than Permitted Liens.
 
 
8

--------------------------------------------------------------------------------

 
 
(h)           Disclosures.  Each of the Members represents and warrants that it
is unaware of any material facts or circumstances which have not been disclosed
in this Agreement, which should be disclosed to the other Member in order to
prevent the representations in this Article II from being materially misleading.
 
2.3           Survival.
 
(a)           The representations and warranties set forth in Section 2.1 shall
survive the execution and delivery of this Agreement until the first (1st)
anniversary of the Effective Date
 
(b)           The representations and warranties set forth in Sections 2.2(a)
through (c) and Section 2.2(f) and (g) shall survive the execution and delivery
of this Agreement until the third (3rd) anniversary of the Effective Date.
 
(c)           The representations and warranties set forth in Sections 2.2(d)
and (e) shall survive the execution and delivery of this Agreement until the
fifth (5th) anniversary of the Effective Date.
 
(d)           The representations and warranties set forth in Section 2.2(g)
shall survive the execution and delivery of this Agreement as to each of the
representations and warranties set forth in Section 2.1 and Sections 2.2(a)
through (f) for so long as each such representation and warranty set forth in
Section 2.1 and Sections 2.2(a) through (f) survives.
 
2.4           Record Title.  Title to the Assets shall be held by the Company.
 
2.5           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 in the event of costs and losses arising out of or resulting from any
breach of the representations and warranties of CORE, CORE shall promptly make
an additional Capital Contribution to the Company of the amount of such costs
and losses incurred by the Company, and shall indemnify the Company, Royal and
its Affiliates for any such costs and losses incurred by the Company, Royal or
its Affiliates.  Any such Capital Contributions shall be considered as part of
CORE’s contribution of the Properties under Section 5.1, and for that reason
shall not increase the Percentage Interest of CORE or be credited to CORE’s
Capital Account.
 
ARTICLE III
NAME, PURPOSES AND TERM
 
3.1           General.  The Company has been duly organized pursuant to the Act
by the filing of its certificate of formation in the Office of the Delaware
Secretary of State by an authorized person.  The Members agree that all of their
rights with respect to the Company and all of the Operations shall be subject to
and governed by this Agreement.  To the fullest extent permitted by the Act,
this Agreement shall control as to any conflict between this Agreement and the
Act or as to any matter provided for in this Agreement that is also provided for
in the Act.
 
3.2           Name.  The name of the Company shall be “Peak Gold, LLC.”  The
Manager shall accomplish any filings or registration required of the Company by
applicable statutes where the Company conducts any Operations.
 
 
9

--------------------------------------------------------------------------------

 
 
3.3           Purposes.  The Company is formed for the following purposes and
for no others, and shall serve as the exclusive means by which the Members, or
either of them, accomplish such purposes:
 
(a)           to conduct Exploration within the Area of Interest,
 
(b)           to acquire additional Properties within the Area of Interest,
 
(c)           to evaluate the possible Development of the Properties,
 
(d)           to engage in Development and Mining Operations on the Properties,
 
(e)           to engage in marketing Products, to the extent permitted 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.
 
3.4           Limitation.  Unless the Members otherwise agree in writing, the
Operations shall be limited to the purposes described in Section 3.3, and
nothing in this Agreement shall be construed to enlarge such purposes.
 
3.5           Effective Date and Term.  The term of the Company shall commence
as of the Effective Date and shall be perpetual, unless earlier terminated
pursuant to Section 12.1.
 
3.6           Registered Agent; Offices.  The initial registered office and
registered agent of the Company shall be as set forth in the Company’s
certificate of formation.  The Manager may from time to time designate a
successor registered office and registered agent and may amend the certificate
of formation of the Company to reflect any such change.  The location of the
principal place of business of the Company shall be at such location as the
Manager shall from time to time select.
 
ARTICLE IV
RELATIONSHIP OF THE MEMBERS
 
4.1           No State-Law Partnership.  Nothing contained in this Agreement
shall be deemed to constitute either Member the partner of the other, or to
create any mining, commercial or other partnership (other than a partnership for
federal and state tax purposes).  Except pursuant to the authority expressly
granted herein or as otherwise agreed in writing between the Members, neither
Member shall have any authority to act for the Company or another Member or to
assume any obligation or responsibility on behalf of the Company or the other
Members, solely by virtue of being a Member.
 
4.2           Federal Tax Elections and Allocations.  The Company shall be
treated as a partnership for federal income tax purposes.  Tax elections and
allocations shall be made as set forth in Exhibit C.
 
 
10

--------------------------------------------------------------------------------

 
 
4.3           State Income Tax.  The Members also agree that, to the extent
permissible under applicable Law, their relationship shall be treated for state
income tax purposes in the same manner as it is for Federal income tax purposes.
 
4.4           Tax Returns.  The Tax Matters Partner, as defined in Exhibit C,
shall prepare and shall file, after approval of the Management Committee, any
tax returns or other tax forms required.
 
4.5           Other Business Opportunities.  Except as expressly provided in
this Agreement, each Member and the Manager shall have the right independently
to engage in and receive full benefits from business activities, whether or not
competitive with the Operations, without consulting the other.  The doctrines of
“corporate opportunity” or “business opportunity” shall not be applied to any
other activity, venture, or operation of either Member or the Manager, and,
except as otherwise provided in Section 12.4, neither Member nor the Manager
shall have any obligation to any Member with respect to any opportunity to
acquire any property outside the Area of Interest at any time, or within the
Area of Interest after the termination of the Company.
 
4.6           Waiver of Right to Partition.  The Members hereby waive and
release all rights of partition, or of sale in lieu thereof, or other division
of Assets, including any such rights provided by statute.
 
4.7           Transfer of Membership Interests.  Except as otherwise provided in
this Agreement, neither Member shall Transfer all or any part of its Membership
Interest.
 
4.8           Implied Covenants; No Additional Duties.  There are no implied
covenants contained in this Agreement other than the contractual covenants of
good faith and fair dealing.  No Manager shall have any fiduciary or other
duties to the Company except as specifically provided by this Agreement, and the
Manager’s and Members’ duties and liabilities otherwise existing at law or in
equity are restricted and eliminated by the provisions of this Agreement to
those duties and liabilities specifically set forth in this
Agreement.  Notwithstanding any contrary provision of this Agreement, in
carrying out any duties hereunder, the Manager and Members shall not be liable
to the Company nor to any Member for breach of any duty for the Manager’s or any
such Member’s good faith reliance on the provisions of this Agreement, the
records of the Company, or such information, opinions, reports or statements
presented by any other Member, Manager, officer or employee of the Company, or
the Management Committee or other committee of the Company, or by any other
person as to matters such Member or the Manager reasonably believes are within
such other person’s professional or expert competence.  The preceding sentence
shall in no way limit any person’s right to rely on information to the extent
provided in Section 18-406 of the Act.
 
4.9           Liabilities; Indemnification.
 
(a)           No Member or Manager of the Company, or any combination of the
foregoing, shall be personally liable under any judgment of a court, or in any
other manner, for any debt, obligation or liability of the Company, whether such
liability or obligation arises in contract, tort or otherwise, solely by reason
of being a Member or Manager of the Company or any combination of the foregoing.
 
 
11

--------------------------------------------------------------------------------

 
 
(b)           The Company shall indemnify, defend and hold harmless each Member
and Manager, and their respective directors, officers, employees, agents and
attorneys from and against any and all third party losses, claims, damages and
liabilities arising out of or relating to (i) the Company or the Operations,
including without limitation Environmental Liabilities and Continuing
Obligations, (ii) any Properties assigned to a Member as an objecting Member
pursuant to Section 14.1, but only to the extent arising out of or relating to
Operations, including without limitation Environmental Liabilities and
Continuing Obligations, conducted prior to the date of such assignment, and
(iii) any reimbursements by one Member to the other Member or Manager of any of
the foregoing pursuant to Section 6.5, except in any case of clauses (i) through
(iii) above to the extent such losses, claims, damages or liabilities arise out
of or result from any conduct described in any of clauses (i) through (iii) of
Section 4.9(c) below.  In all cases of this Section 4.9(b) and without limiting
Section 6.5, indemnification shall be provided only out of and to the extent of
the net assets of the Company and no Member shall have any personal liability
whatsoever on account thereof.  Notwithstanding the foregoing, the Company’s
indemnification pursuant to this Section 4.9(b) as to third party claims shall
be only with respect to such loss, liability or damage that is not otherwise
compensated by insurance carried for the benefit of the Company.
 
(c)           Subject to Section 4.8, each Member shall indemnify, defend and
hold harmless the Company, the other Member, and such other Member’s directors,
officers, employees, agents and attorneys from and against any and all losses,
claims, damages and liabilities arising out of or relating to (i) any
unauthorized act or any assumption of liability by the indemnifying Member
(including in its capacity as a Manager), or any of its directors, officers,
employees, agents and attorneys done or undertaken, or apparently done or
undertaken, on behalf of the Company or the other Member, except pursuant to the
authority expressly granted herein or as otherwise agreed in writing between the
Members, (ii) any breach by such Member of any of its representations or
warranties set forth in this Agreement or (iii) any breach by such Member of any
covenant contained in this Agreement caused by or attributable to such Member’s
willful misconduct or gross negligence, including in its capacity as a Manager.
 
(d)           NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO
PERSON OR ENTITY OTHER THAN A MEMBER SHALL HAVE THE RIGHT TO ENFORCE ANY
REPRESENTATION OR WARRANTY OF THE OTHER MEMBER HEREUNDER, OR ANY OBLIGATION OF
THE OTHER MEMBER TO CONTRIBUTE CAPITAL HEREUNDER, TO FUND CONTINUING
OBLIGATIONS, TO REIMBURSE OR INDEMNIFY ANY OTHER MEMBER HEREUNDER, AND
SPECIFICALLY NEITHER THE COMPANY NOR ANY LENDER OR OTHER THIRD PARTY SHALL HAVE
ANY SUCH RIGHTS, IT BEING EXPRESSLY UNDERSTOOD THAT THE REPRESENTATIONS AND
WARRANTIES, AND THE CONTRIBUTION, REIMBURSEMENT AND INDEMNIFICATION OBLIGATIONS
SET FORTH IN Article II AND ARTICLE XIII AND SECTION 4.9 SHALL BE ENFORCEABLE
ONLY BY A MEMBER AGAINST ANOTHER MEMBER (WHICH, NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, ARE IN ALL SUCH CASES FOR THE BENEFIT OF THE
MEMBERS).  FOR THE AVOIDANCE OF DOUBT, THE COMPANY SHALL BE BOUND BY
ARTICLE II AND ARTICLE XIII AND SECTION 4.9(b) BUT SHALL HAVE NO RIGHT TO
ENFORCE THOSE PROVISIONS AGAINST A MEMBER, SUCH RIGHTS BEING EXCLUSIVELY VESTED
IN THE MEMBERS.  ANY MEMBER MAY BRING A DIRECT ACTION AGAINST ANY OTHER MEMBER
WITH RESPECT TO ANY OF ARTICLE II OR ARTICLE XIII OR SECTION 4.9 WITHOUT THE
REQUIREMENT TO BRING A DERIVATIVE ACTION OR OTHERWISE SATISFY THE REQUIREMENTS
OF SECTIONS 18-1001 THROUGH 18-1004 OF THE ACT OR OTHER SIMILAR REQUIREMENTS.
 
 
12

--------------------------------------------------------------------------------

 
 
ARTICLE V
CONTRIBUTIONS BY MEMBERS
 
5.1           Members’ Initial Contributions.
 
(a)           By CORE.  CORE, as its Initial Contribution, has contributed the
Contributed Assets to the capital of the Company as of the Effective Date.  The
agreed value of CORE’s Initial Contribution is Forty Five Million Seven Hundred
Thousand Dollars ($45,700,000.00), which amount shall be credited to CORE’s
Capital Account on the Effective Date and shall be allocated among the
Contributed Assets as set forth on Schedule 5.1(a) to this Agreement for all
purposes of this Agreement.
 
(b)           By Royal.  The period from the Effective Date through October 31,
2018 is referred to as the “Earn In Period.”
 
(i)           Initial Contribution.  Royal, as its Initial Contribution, has
contributed Five Million Dollars ($5,000,000.00) to the Company as of the
Effective Date, which sum was paid into the Business Account and shall be used
to fund Programs and Budgets approved pursuant to Article IX.  Royal’s Initial
Contribution shall not be credited to Royal’s Capital Account and Royal shall
not earn a Percentage Interest in respect of its Initial Contribution.
 
(ii)           Earn-In Contributions.  Royal shall have the right (but not the
obligation) to earn a Percentage Interest by making additional contributions to
the Company (“Earn In Contributions”), in its sole discretion, during the
Earn-In Period, as follows, which sums shall be shall be paid into the Business
Account, credited to Royal’s Capital Account, and used to fund Programs and
Budgets approved pursuant to Article IX:
 
(1)           Phase I Earn In.  Royal may make further contributions in an
amount up to an additional Five Million Dollars ($5,000,000) (the “Phase I Earn
In Contributions”) for an aggregate Percentage Interest of up to ten percent
(10%).  If Royal makes Phase I Earn In Contributions of less than Five Million
Dollars ($5,000,000), then, for each One Million Dollars ($1,000,000) in Phase I
Earn In Contributions, Royal will earn an incremental two percent (2.0%)
Percentage Interest.
 
(2)           Phase II Earn-In.  If Royal funds the entire Phase I Earn In
Contribution, then Royal may make further contributions in an amount up to an
additional Ten Million Dollars ($10,000,000) (the “Phase II Earn In
Contributions”) for an additional Percentage Interest of up to fifteen percent
(15%) (and a total Percentage Interest of up to twenty-five (25%)).  If Royal
makes Phase II Earn In Contributions of less than Ten Million Dollars
($10,000,000), then, for each additional One Million Dollars ($1,000,000) in
Phase II Earn In Contributions, Royal will earn an incremental one and one-half
percent (1.5%) Percentage Interest.
 
 
13

--------------------------------------------------------------------------------

 
 
(3)           Phase III Earn-In.  If Royal funds the entire Phase II Earn In
Contribution, then Royal may make further contributions in an amount up to an
additional Ten Million Dollars ($10,000,000) (the “Phase II Earn In
Contributions”) for an additional Percentage Interest of up to fifteen percent
(15%) (and a total Percentage Interest of up to forty percent (40%)).  If Royal
makes Phase III Earn In Contributions of less than Ten Million Dollars
($10,000,000), then, for each additional One Million Dollars ($1,000,000) in
Phase III Earn In Contributions, Royal will earn an incremental one and one-half
percent (1.5%) Percentage Interest.
 
5.2           Royal Resignation Prior to Making Earn In Contributions.
 
(a)           Prior to making any Earn In Contributions, Royal, in its sole
discretion, may elect to resign from the Company at any time, and, further, if
Royal elects not to make any Earn In Contributions on or prior to October 31,
2018, then Royal shall be deemed to have resigned from the Company.
 
(b)           Upon Royal’s resignation under this Section 5.2, the Company shall
automatically acquire Royal’s entire Membership Interest, free and clear of
security interests or other Liens arising by, through or under Royal.  Royal
will not be entitled to receive distributions or any further consideration from
the Company.  Royal shall have no further right, title or interest in the
Company or any indirect interest in the Assets. Royal agrees to execute such
documents as may be reasonably requested by CORE to reflect such resignation and
the relinquishment of Royal’s entire Membership Interest.
 
(c)           Upon Royal’s resignation under this Section 5.2, Royal shall have
no further right (nor obligation) to make any Earn In Contribution; provided
that such resignation shall not relieve Royal of (i) its obligation to fund then
unfunded Operations under an adopted Budget and Program up to the amount of
Royal’s Initial Contribution, (ii) its responsibility to reimburse CORE as
provided in Section 6.5 for third party losses, claims, damages and liabilities
existing or arising out of actions, occurrences or events occurring prior to
Royal’s resignation in an amount or amounts (in the aggregate) not to exceed One
Hundred Percent (100%) of Royal’s portion of such losses, claims, damages and
liabilities until Royal has contributed (together with all other contributions
of Royal prior to the date of resignation) an aggregate amount equal to Royal’s
Initial Contribution; or (c) its responsibility to indemnify, defend and hold
harmless those entities as provided in Section 4.9(c).
 
(d)           Except as expressly provided in this Section 5.2, Royal’s
resignation shall (i) relieve Royal from any other obligation to make
contributions or provide reimbursement to CORE hereunder, and (ii) otherwise be
without liability, penalty or consequence to Royal.
 
5.3           Additional Cash Contributions/Joint Funding Period.  Following the
expiry of the Earn In Period or such earlier date by which Royal has earned a
forty percent (40%) Membership Interest (the “Joint Funding Period”), the
Members, subject to any election permitted by Section 6.3, and in addition to
the Initial Contributions and Earn In Contributions, shall be obligated to
contribute funds to approved Programs and Budgets in proportion to their
respective Percentage Interests (“Capital Contributions”).
 
 
14

--------------------------------------------------------------------------------

 
 
5.4           No Right to Return of Contributions.  No Member shall be entitled
to the return of any part of its Capital Contributions or to be paid interest in
respect of either its Capital Account or its Capital Contributions.  No unrepaid
Capital Contribution shall constitute a liability of the Company, the Manager or
any Member.  A Member is not required to contribute or to lend cash or property
to the Company to enable the Company to return any other Member’s Capital
Contributions.  The provisions of this Section 5.4 shall not limit a Member’s
rights or obligations under Article XII.
 
ARTICLE VI
PERCENTAGE INTERESTS
 
6.1           Initial Percentage Interests.  On the Effective Date, the Members
shall have the following initial Percentage Interests:
 
(a)           CORE: 100%
 
(b)           Royal: 0%
 
6.2           Changes in Percentage Interests.  A Member’s Percentage Interest
shall only be changed as follows:
 
(a)           As provided in Section 5.1; or
 
(b)           Upon the funding of Capital Contributions after an election by a
Member pursuant to Section 6.3 to not make Capital Contributions to an approved
Program and Budget, or to fund less than the full Capital Contribution to an
approved Program and Budget than the percentage reflected by its Percentage
Interest; or
 
(c)           During the Joint Funding Period, in the event of default by a
Member in making its agreed-upon Capital Contribution to an approved Program and
Budget, followed by an election by the other Member to invoke Section 6.4(b); or
 
(d)           Upon the Transfer by a Member of all or less than all of its
Membership Interest in accordance with Article XV; or
 
(e)           Upon the issuance of additional Membership Interests in the
Company with the unanimous consent of the Members.
 
6.3           Election Not to Make Capital Contribution; Voluntary Reduction in
Percentage Interest; Buyout.
 
(a)           Election Not to Make Capital Contribution.  During the Joint
Funding Period, a Member (the “Electing Member”) may elect, as provided in
Section 9.5, to limit its Capital Contributions to an approved Program and
Budget as follows:
 
 
15

--------------------------------------------------------------------------------

 
 
(i)           By making Capital Contributions to the approved Program and Budget
to some lesser amount than its respective Percentage Interest; or
 
(b)           (ii)           By not making any Capital Contributions to the
approved Program and Budget.
 
(c)           Voluntary Reduction in Percentage Interest.  The Percentage
Interest of an Electing Member shall be recalculated at the time each such
Capital Contribution is made by dividing:  (i) the sum of (a) the value of the
Electing Member’s Initial Contribution and (as to Royal) Earn In Contributions
as determined under Section 5.1, plus (b) the total of all of the Electing
Member’s Capital Contributions under Section 5.3, plus (c) the amount of Capital
Contribution, if any, the Electing Member funds pursuant to an election to
contribute to the approved Program and Budget; by (ii) the sum of (a), (b) and
(c) above for both Members; and then multiplying the result by one hundred (the
“Voluntary Reduction in Percentage Interest”).  The Percentage Interest of the
other Member shall thereupon become the difference between 100% and the Electing
Member’s recalculated Percentage Interest.
 
(d)           Buyout.  If at the time of any Capital Contribution, an Electing
Member’s Percentage Interest is or as a result of such Capital Contribution
becomes less than five percent (5%), the other Member shall have the right to
buy-out the remaining Membership Interest of the Electing Member for a purchase
price (the “Buyout Purchase Price”) equal to the product of: (i) the applicable
Dollar Value Per Basis Point of Electing Member Percentage Interest multiplied
by (ii) the product (stated in basis points) of (1) the applicable Electing
Member Post Funding Percentage Interest multiplied by (2) 100, where:
 
(i)           “Electing Member Attributable Share of Current Capital Call” means
the result (in dollars) of (i) the amount of the relevant capital call (in
dollars) multiplied by (ii) the Electing Member’s Percentage Interest
immediately prior to the capital call;
 
(ii)           “Electing Member Post Funding Percentage Interest” means the
result (stated as a percentage) of (i) the amount of the Electing Member’s
Capital Account (in dollars) immediately prior the capital call divided by (ii)
the aggregate amount of both Member’s Capital Accounts immediately following the
capital call (in dollars);
 
(iii)           “Buyout Factor” means the result (stated in basis points) of (a)
(i) the Electing Member’s Percentage Interest immediately prior to the capital
call (stated as a percentage) minus (ii) the Electing Member Post Funding
Percentage Interest (stated as a percentage) multiplied by (b) 100; and
 
(iv)           “Dollar Value Per Basis Point of Electing Member Percentage
Interest” means the result (in dollars) of (i) the Electing Member Attributable
Share of Capital Call (stated in dollars) divided by (ii) the Buyout Factor
(stated in basis points).
 
6.4           Default in Making Contributions.
 
(a)           Subject to an election made under Section 6.3 not to make a
Capital Contribution, if a Member defaults in making a Capital Contribution
required by an approved Program and Budget, the non-defaulting Member may
advance the amount of the defaulted upon Capital Contribution on behalf of the
defaulting Member and treat the same, together with any accrued interest, as a
demand loan to the defaulting Member bearing interest from the date of the
advance at the rate provided in Section 10.3.  The failure to repay said loan
upon demand shall be a default.  A non-defaulting Member may elect any
applicable remedy under Section 6.4(b) or Section 6.6 or any other rights and
remedies available to such Member at Law or in equity.  All such remedies shall
be cumulative.  The election of one or more remedies shall not waive the
election of any other remedies.
 
 
16

--------------------------------------------------------------------------------

 
 
(b)           The Members acknowledge that if a Member defaults in making a
Capital Contribution or in repaying a loan made by the non-defaulting Member, as
required hereunder, it will be difficult to measure the damages resulting from
such default.  In the event of such default, as reasonable liquidated damages,
the non-defaulting Member may, with respect to any such default not cured within
thirty (30) days after notice to the defaulting Member of such default, declare
the defaulting Member in default of such obligation in which case the defaulting
Member’s Percentage Interest shall be reduced by two (2) times the Voluntary
Reduction in Percentage as calculated pursuant to Section 6.3.
 
6.5           Continuing Obligations and Liabilities.  Each Member shall be
liable to the other Member (including in its capacity as a Manager) to reimburse
and pay to such other Member its respective share, based on Percentage
Interests, of any and all third party losses, claims, damages and liabilities
arising out of or relating to (a) the Company or the Operations, including
without limitation Environmental Liabilities and Continuing Obligations,
incurred by such other Member, and (b) any Properties assigned to the other
Member as an objecting Member pursuant to Section 14.1, but only to the extent
in the case of this clause (b) arising out of or relating to Operations,
including without limitation Environmental Liabilities and Continuing
Obligations, conducted prior to the date of such assignment.  The reimbursement
obligation of a Member under this Section 6.5 shall apply whether or not any
such losses, claims, damages or liabilities accrue before or after the
resignation or deemed resignation of such Member, the Transfer by such Member of
all or any portion of its Membership Interest, the dissolution or liquidation of
the Company, or any reduction of such Member’s Percentage Interest, but in each
case only to the extent not indemnified by the Company pursuant to
Section 4.9(b), and not to the extent such losses, claims, damages and
liabilities arise out of conduct of the Member requesting reimbursement
described in any of clauses (i) through (iii) of Section 4.9(c).  For purposes
of this Section 6.5, such Member’s share of such liability shall be equal to its
Percentage Interest at the time such liability was incurred (or as to any such
liabilities arising or existing prior to the Effective Date, such Member’s
initial Percentage Interest), except as otherwise provided in Section 5.2.  Any
resignation or deemed resignation of a Member, any Transfer by such Member of
all or any portion of its Membership Interest, or any reduction of a Member’s
Percentage Interest under this Article VI shall not relieve such Member of its
share of any such liability accruing before such resignation, Transfer or
reduction.  Notwithstanding the foregoing, the provisions of this Section 6.5
shall apply only in the case that the Member requesting reimbursement is finally
determined to be personally liable for such losses, claims, damages or
liabilities, and shall not be construed as a waiver or reduction of the
limitations under the Act or other applicable Law of the liability of a Member
or the Manager for Company obligations.
 
6.6           Grant of Security Interest.  Each Member hereby grants to the
other Member a security interest in its Membership Interest, and any accessions
thereto and any proceeds and products therefrom, in order secure each and every
obligation of such granting Member to the other Member under this
Agreement.  Each Member hereby authorizes the other to file and record all
financing statements, continuation statements or other instruments necessary or
desirable to perfect or effectuate the provisions of this Section 6.6.  In
connection with any foreclosure, transfer in lieu, or other enforcement of
rights in the security interest granted in this Section 6.6, notwithstanding any
contrary provision in Article XV, the acquiring person or entity shall, at the
election of the remaining Member, in its sole discretion, automatically be
admitted as a Member in the Company without any further action of the defaulting
Member; provided, that the defaulting Member shall take all action that the non-
defaulting Member may reasonably request to effectuate the admission of the
transferee as a Member of the Company.
 
 
17

--------------------------------------------------------------------------------

 
 
ARTICLE VII
MANAGEMENT COMMITTEE
 
7.1           Organization and Composition.  The Members hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under this Agreement.  During the Earn In Period and,
thereafter, provided Royal has earned at least a 40% Membership Interest, the
Management Committee shall consist of one (1) designate appointed by CORE and
two (2) designates appointed by Royal (each, a “Designate”).  If, after
October 31, 2018, Royal has not earned at least a 40% Membership Interest, the
Management Committee shall consist of two (2) Designates appointed by the Member
having the majority Percentage Interest and one (1) Designate appointed by the
other Member.  Each Member may appoint one or more alternates to act in the
absence of a regular Designate.  Any alternate so acting shall be deemed a
Designate.  Appointments shall be made or changed by notice to the other
Member.  Designates shall not be considered managers under the Act in such
capacity, but derive all of their right, power and authority from the
Members.  No Member or Designate shall have the power to bind the Company.  All
documents and instruments executed on behalf of the Company shall be signed by
the Manager or by another officer or employee of the Company to whom the Manager
has delegated the general or specific authority.  The Member having the majority
of the membership of the Management Committee shall appoint one of its
Designates to serve as chair of the Management Committee.
 
7.2           Voting; Decisions.
 
(a)           Each Designate shall have one vote on the Management Committee.
 
(b)           Except as provided in Section 7.2(c), the affirmative vote of a
majority of the Designates shall determine the decisions of the Management
Committee.
 
(c)           The following actions by the Management Committee require the
affirmative vote of all Designates:
 
(i)           making any amendment to this Agreement;
 
(ii)           admitting any new Member, other than as expressly permitted by
this Agreement;
 
 
18

--------------------------------------------------------------------------------

 
 
(iii)           appointing a replacement Manager following the resignation or
removal of the Manager;
 
(iv)           adjusting the Percentage Interests of the Members, other than as
expressly permitted in this Agreement;
 
(v)           accepting in-kind Capital Contributions from the Members, other
than CORE’s Initial Contribution;
 
(vi)           electing to dissolve or wind-up the Company or to take any action
that is intended to result in dissolution or winding up of the Company;
 
(vii)           commencing a voluntary proceeding in bankruptcy in the name of
the Company or seeking the protection of any federal or state bankruptcy or
insolvency Law or debtor relief statute for the Company;
 
(viii)           entering into any merger or other business combination
involving the Company;
 
(ix)           selling, exchanging, leasing, abandoning, mortgaging, pledging or
otherwise disposing of or transferring Assets having a fair market value of more
than One Hundred Thousand Dollars ($100,000); except for (1) any transfer of
Assets pursuant to, or which consists of, Liens granted pursuant to a deed of
trust or other security documents executed in connection with a credit
agreement, (2) any transfer of Assets in the ordinary course of business, or
(3) the sale or other disposition of Assets which are replaced by Assets of an
equivalent or greater value or which have become obsolete and are of no further
value to the Project;
 
(x)           terminating, or entering into any amendment, supplement or other
modification to the Tetlin Lease, Tetlin Estoppel or Tetlin Stability Agreement;
 
(xi)           assigning any right or obligation of the Company under the Tetlin
Lease;
 
(xii)           abandoning or surrendering, any mining claim included in the
Properties; determinations of fair market value for the purpose of this
Agreement including under Exhibit C, other than with respect to the fair market
value of the Contributed Assets at the date of CORE’s Initial Contribution,
which the Members agree is as set forth in Exhibit A;
 
(xiii)           taking any action which would cause the Company not to be
recognized as a partnership for federal income state tax purposes, except when
such action is required by Law; or
 
(xiv)           amending the tax policies or tax elections set forth on
Exhibit C or terminating Exhibit C;
 
(xv)           selection or change of accounting firms selected to prepare
and/or audit the Company’s financial statements and to prepare the Company’s tax
returns;
 
 
19

--------------------------------------------------------------------------------

 
 
(xvi)           preparation of tax returns of the Company, as set forth in
Exhibit C;
 
(xvii)           making, incurring, issuing or assuming any of the following (an
“Expenditure or Obligation”) involving a dollar amount of more than (1) Two
Hundred Fifty Thousand Dollars ($250,000) during Exploration and Development and
(2) Five Hundred Thousand Dollars ($500,000) during Construction and Mining:
making any expenditure; lending or borrowing money; incurring any expense;
executing agreements; or incurring, assuming or guaranteeing any obligation, or
contracting for indebtedness or other liability, or securing the same by
mortgage, deed of trust, or other Lien; except when any such Expenditure or
Obligation is made, incurred, issued or assumed pursuant to (A) any Material
Contract that has been approved by the Management Committee, (B) any applicable
Program and Budget approved by the Management Committee (or as permitted under
Sections 9.6 or 9.7), or (C) the ordinary day-to-day business of the Company;
 
(xviii)           entering into, materially amending or terminating any Material
Contract (other than the Tetlin Lease), or amending any agreement that is not a
Material Contract when such amendment would have the effect of causing such
agreement to become a Material Contract (subject to the exceptions set forth in
Section 7.2(c)(xvii);
 
(xix)           requiring any Member to contribute, advance, loan or provide a
Capital Contribution, credit facility or other credit support;
 
(xx)           bringing, defending or otherwise engaging in any actions at Law
or in equity, or under alternative forms of dispute resolution including without
limitation arbitration and meditation, on behalf of the Company by or against
third parties (each of the foregoing, a “Legal Proceeding”) or consenting to or
entering into a judgment or settlement of any Legal Proceeding, when such Legal
Proceeding involves the expense, expenditure, loaning or borrowing by the
Company of more than One Hundred Thousand Dollars ($100,000) except when such
expense, expenditure, loaning or borrowing of funds is made pursuant to an
approved Program and Budget; and
 
(xxi)           engaging in any transaction with any Member or an Affiliate
thereof, or entering into any Material Contract with a Member or an Affiliate
thereof, except when such transaction or Material Contract is for goods or
services provided by a Member pursuant to provisions set forth in this
Agreement.
 
 
20

--------------------------------------------------------------------------------

 
 
7.3           Meetings.  The Management Committee shall hold regular meetings at
least twice per year (and, on approval of the Management Committee, up to four
(4) times per year).  The Management Committee shall meet in person in Denver,
Colorado, or at another location approved by the Management Committee.  The
Manager shall give at least thirty (30) days’ notice to the Members of such
regular meetings.  Additionally, either Member may call a special meeting upon
at least ten (10) days notice to the Manager and the other Member.  In case of
emergency, reasonable notice of a special meeting shall suffice.  Special
meetings shall be held in person in Denver, Colorado, or at another location
approved by the Management Committee.  There shall be a quorum at any meeting of
the Management Committee if at least one Designate representing each Member is
present.  If a quorum is not present at a meeting, business of the Management
Committee cannot be conducted at such meeting; however either Member may
reconvene the same meeting upon ten (10) days written notice to the Manager and
the other Member.  If a Member (through its Designate) fails to attend two (2)
consecutive properly noticed meetings of the Management Committee, then a quorum
shall be deemed to exist at the second (2nd) such meeting if the other Member is
represented by at least one of its Designates and a vote of such Member shall be
sufficient to act on any matter properly included on the agenda for such meeting
as included in the notice for such meeting even if such action would otherwise
require unanimous approval of the Members.  Each notice of a meeting shall
include an itemized agenda prepared by the Manager in the case of a regular
meeting, or by the Member calling the meeting in the case of a special meeting,
but, if a quorum is present at a meeting, any matters not itemized on the agenda
may be considered at the meeting with the consent of all Designates
present.  Meetings of the Management Committee may also be held by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such communications equipment shall constitute presence in person at
the meeting.  The Manager shall prepare minutes of all meetings and shall
distribute copies of such minutes to the Members within ten (10) days after the
meeting.  The minutes, when signed by all Members, shall be the official record
of the decisions made by the Management Committee and shall be binding on the
Manager and the Members.  If a Member 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 Members.  If the Management Committee
does not reach agreement on the minutes of the meeting within such thirty (30)
day period, the minutes of the meeting as prepared by the Manager together with
the other Member’s proposed changes shall collectively constitute the record of
the meeting.  If personnel employed in Operations are required to attend a
Management Committee meeting, reasonable costs incurred in connection with such
attendance shall be a Company cost.  All other costs shall be paid by the
Members individually.
 
7.4           Action Without Meeting.  Any action required or permitted to be
taken at a meeting of the Management Committee may be taken without a meeting
and without prior notice if the action is evidenced by a written consent
describing the action taken, signed by the member or members of the Management
Committee having the requisite authority to take such action at a meeting at
which all of the members of the Management Committee were present and voted;
provided that notice of all actions taken by less than unanimous written consent
shall be provided to all members of the Management Committee (other than members
of the Management Committee executing such consent) not later than ten (10) days
after the taking of such action.  Action taken under this Section 7.4 shall be
effective when members of the Management Committee holding the requisite
authority have signed the consent, unless the consent specifies a different
effective date.
 
7.5           Matters Requiring Approval.  Except as expressly delegated to the
Manager in Section 8.2, the Management Committee shall have exclusive authority
to determine all management matters related to the Company.
 
 
21

--------------------------------------------------------------------------------

 
 
ARTICLE VIII
MANAGER
 
8.1           Appointment.  The Members hereby appoint Royal as the Manager,
initially, with overall management responsibility for Operations during the Earn
In Period, and thereafter provided Royal holds at least a forty percent (40%)
Percentage Interest, and Royal hereby agrees to serve as Manager for such period
or until it earlier resigns as provided in Section 8.4.
 
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 approved Programs and Budgets:
 
(a)           The Manager shall manage, direct and control Operations, including
without limitation to market and sell all Products.
 
(b)           The Manager shall implement the decisions of the Management
Committee, shall make from Company funds all expenditures necessary to carry out
Programs approved by the Management Committee, and shall promptly advise the
Management Committee if the Company lacks sufficient funds for the Manager to
carry out Programs approved by the Management Committee.
 
(c)           The Manager shall:  (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and transportation services
required for Operations, such purchases and acquisitions to be made 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
Liens, except for 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
released or discharged in a diligent manner, or Liens specifically approved by
the Management Committee.
 
(d)           The Manager shall conduct such title examinations and cure such
title defects as may be advisable in the reasonable judgment of the Manager.
 
(e)           The Manager shall:  (i) make or arrange for all payments required
by leases, licenses, permits, contracts and other agreements related to the
Assets; (ii) pay all taxes, assessments and like charges on Operations and
Assets except taxes determined or measured by a Member’s sales revenue or net
income.  If authorized by the Management Committee, the Manager shall have the
right to contest in the courts or otherwise, the validity or amount of any
taxes, assessments or charges if the Manager deems them to be unlawful, unjust,
unequal or excessive, or to undertake such other steps or proceedings as the
Manager may deem reasonably necessary to secure a cancellation, reduction,
readjustment or equalization thereof before the Manager shall be required to pay
them, but in no event shall the Manager permit or allow title to the Assets to
be lost as the result of the nonpayment of any taxes, assessments or like
charges; and (iii) shall 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 applicable federal, state and local laws and
regulations; (iii) notify promptly the Management Committee of any allegations
of substantial violation of any thereof of which the Manager has notice; and
(iv) prepare and file all reports or notices required for 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, and the Manager has timely
cured or disposed of such violation (to the extent reasonably possible) through
performance, or payment of fines and penalties.
 
 
22

--------------------------------------------------------------------------------

 
 
(g)           The Manager shall prosecute and defend, but shall not initiate
without consent of the Management Committee, all litigation or administrative
proceedings arising out of Operations subject to approval of the Management
Committee under Section 7.2(c)(xxi).  The non-managing Member shall have the
right to participate, at its own expense, in such litigation or administrative
proceedings.  The non-managing Member shall approve in advance any settlement
involving payments, commitments or obligations in excess of Two Hundred Fifty
Thousand Dollars ($250,000) in cash or value.
 
(h)           The Manager shall obtain insurance for the benefit of the Company
as provided in Exhibit D or as may otherwise be determined from time to time by
the Management Committee.
 
(i)           The Manager may dispose of Assets, whether by abandonment,
surrender or Transfer in the ordinary course of business, except that Properties
may be abandoned or surrendered only as provided in Article XIV and subject to
approval of the Management Committee under Section 7.2(c)(xii).
 
(j)           The Manager shall have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent contractors.
 
(k)           The Manager shall perform or cause to be performed during the term
of this Agreement all assessment and other work required by Law in order to
maintain the mining claims 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 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 in accordance with the Program approved by the Management
Committee.  The Manager shall timely record with the appropriate county and file
with the appropriate United States agency, affidavits in proper form attesting
to the performance of assessment work or notices of intent to hold in proper
form, and allocating therein, to or for the benefit of each claim, at least the
minimum amount required by Law to maintain such claim or site.
 
(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 Federal Law hereafter
enacted.
 
 
23

--------------------------------------------------------------------------------

 
 
(m)           The Manager shall keep and maintain all required accounting and
financial records pursuant to the Accounting Procedure and in accordance with
customary cost accounting practices in the mining industry.
 
(n)           The Manager shall maintain Capital Accounts of the Members in
accordance with Exhibit C.
 
(o)           The Manager shall prepare an Environmental Compliance plan for all
Operations consistent with the requirements of any applicable laws or
contractual obligations and shall include in each Program and Budget sufficient
funding to implement the Environmental Compliance plan and to satisfy the
financial assurance requirements of any applicable Law or contractual obligation
pertaining to Environmental Compliance.  To the extent practical, the
Environmental Compliance plan shall incorporate concurrent reclamation of
Properties disturbed by Operations.
 
(p)           The Manager shall manage the performance of Continuing Obligations
when and as economic and appropriate, whether before or after dissolution of the
Company, subject to availability of funds in the Environmental Compliance Fund,
and shall be reasonably compensated for such activities even after dissolution
of the Company.  The Manager shall have the right to delegate performance of
Continuing Obligations to persons having demonstrated skill and experience in
relevant disciplines.  As part of each Program and Budget submittal, the Manager
shall specify in such Program and Budget the measures to be taken for
performance of Continuing Obligations and the cost of such measures.  The
Manager shall keep the other Member reasonably informed about the Manager’s
efforts to discharge Continuing Obligations.  Authorized representatives of each
Member 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.
 
(q)           The funds that are to be deposited into the Environmental
Compliance Fund shall be maintained by the Manager in a separate, interest
bearing cash management account, which may include, but is not limited to, money
market investments and money market funds, or in longer term investments if
approved by the Management Committee.  Such funds shall be used solely for
Environmental Compliance and Continuing Obligations, including the committing of
such funds, interests in property, insurance or bond policies, or other security
to satisfy Laws regarding financial assurance for the reclamation or restoration
of the Properties, and for other Environmental Compliance requirements.
 
(r)           The Manager shall establish a technical committee with experience
and expertise to advise the Manager in matters of Exploration, Development and
conduct of other Operations as required from time to time.
 
 
24

--------------------------------------------------------------------------------

 
 
(s)           All communications between the Company and its contractors shall
be handled by the Manager and not by any Member (unless that Member is the
Manager).
 
(t)           The Manager shall undertake all other activities reasonably
necessary to fulfill the foregoing, subject where relevant to availability of
funds in the Environmental Compliance Fund, and where relevant shall be
reasonably compensated for such activities even after dissolution of the
Company.
 
(u)           The Manager shall not be in default of any duty under this
Section 8.2 if its failure to perform results from the failure of the
non-managing Member to perform acts or to contribute amounts required of it by
this Agreement.
 
8.3           Standard of Care.  The Manager shall conduct all Operations in a
good, workmanlike and efficient manner, in accordance with sound mining and
other applicable industry standards and practices regularly observed for mining
operations similar to the Operations in North America, and in accordance with
applicable Laws, and the terms and provisions of leases, licenses, permits,
contracts and other agreements pertaining to Assets.  Notwithstanding anything
in this Agreement to the contrary, the Manager shall not be liable to the
non-managing Member or the Company for any breach of this Agreement or other 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.
 
8.4           Resignation; Deemed Offer to Resign.  The Member acting as Manager
may resign upon ninety (90) days’ prior notice to the other Member, in which
case the other Member may elect to become the new Manager by notice to the
resigning Member within thirty (30) days after the notice of resignation;
provided that if the other Member does not make such an election within such
thirty (30) day period, a new Manager shall be appointed by the Management
Committee.  If any of the following shall occur, the Manager shall be deemed to
have offered to resign, which offer shall be accepted by the other Member, if at
all, within ninety (90) days following such deemed offer:
 
(a)           During the Joint Funding Period, the Percentage Interest of such
Member becomes less than fifty percent (50%); provided that during the Joint
Funding Period, Royal shall not be deemed to have offered to resign as Manager
so long as its Percentage Interest is at least forty percent (40%); or
 
(b)           The Manager fails to materially perform an obligation imposed upon
the Manager under this Agreement or fails to conduct Operations in accordance
with the standard of care specified in Section 8.3 and such failure continues
for a period of sixty (60) days after notice from the other Member demanding
performance; or
 
(c)           Provided sufficient funds are available in the Business Account,
the Manager fails to pay or contest in good faith Company bills and Company
debts within sixty (60) days after they are due; or
 
(d)           A receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for a substantial part of such Member’s 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 such Member, or
 
 
25

--------------------------------------------------------------------------------

 
 
(e)           Such Member commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect; 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; makes a general assignment for the benefit of creditors;
fails generally to pay its or the Company’s debts as such debts become due; or
takes corporate or other action in furtherance of any of the foregoing; or
 
(f)           Entry is made against such Member of a judgment, decree or order
for relief affecting a substantial part of its 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;
or
 
(g)           A Member who serves as Manager breaches its representations and
warranties, any covenants or other terms of this Agreement.
 
8.5           Payments To Manager.  The Manager shall be compensated for its
service and reimbursed for its costs hereunder in accordance with the Accounting
Procedure.
 
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 with unrelated persons in arm’s-length transactions or on
terms that have been approved by the non-managing Member.
 
8.7           Information Rights; Audits and Site Visits.  The Manager shall
provide each Member with the following financial statements and reports at the
times indicated below:
 
(a)           Quarterly within twenty-five (25) days after the end of each
fiscal quarter ending March 31, September 30 and December 31, unaudited
financial statements prepared in accordance with GAAP, or such method of
accounting as determined by the Management Committee in its sole discretion,
with respect to such fiscal quarter, including statements of operations, balance
sheets, cash flow statements and statements of owners’ equity, in each case,
setting forth in comparative form the figures for the previous year and a
comparison to budgeted amounts.  Such financial statements shall be subject to
audit by the other Member at any time at its request at its own expense;
 
(b)           Annually within forty-five (45) days after the end of each fiscal
year ending June 30, financial statements prepared in accordance with GAAP,
including statements of operations, balance sheets, cash flow statements and
statements of owners’ equity with respect to such fiscal year, setting forth in
each case in comparative form the figures for the previous year, which financial
statements shall be audited by an independent certified public accounting firm
selected and approved by the Management Committee in accordance with
Section 7.2(c)(xvi);
 
(c)           Quarterly within 30 days after the end of each fiscal quarter
ending March 31, June 30, September 30 and December 31, a quarterly activity
report that includes statements of expenditures and comparisons of such
expenditures to the approved Budget then in effect, a discussion of the
business, operations and results of the Company for such fiscal quarter, the
Management Committee’s plan for the upcoming fiscal quarter and a discussion of
any issues or events that the Management Committee determines are likely to have
a material effect on the Operations and results for the upcoming fiscal quarter;
 
 
26

--------------------------------------------------------------------------------

 
 
(d)           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;
 
(e)           At least three (3) days prior to each scheduled Management
Committee meeting, ‘board books’ for the Designates; and
 
(f)           such other reports as any member of the Management Committee may
reasonably request.
 
Subject to Article XVII, at all reasonable times the Manager shall provide the
other Member, access to, and the right to inspect and, at such Member’s cost and
expense, copies of all maps, drill logs and other drilling data, core, pulps,
reports, surveys, assays, analyses, production reports, operations, technical,
accounting and financial records, and other business information, to the extent
preserved or kept by the Manager.  In addition, the Manager shall allow the
non-managing Member, 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, so long as the non-managing Member does not unreasonably
interfere with Operations.
 
ARTICLE IX
PROGRAMS AND BUDGETS
 
9.1           Initial Program and Budget.  The Manager shall present a proposed
initial Program and Budget to the Management Committee within ninety (90) days
of the Effective Date.
 
9.2           Operations Pursuant to Programs and Budgets.  Except as otherwise
provided in Article IX and Article XIII, Operations shall be conducted, expenses
shall be incurred, and Assets shall be acquired only pursuant to approved
Programs and Budgets.  Each Program and Budget approved pursuant to this
Agreement shall provide for accrual of reasonably anticipated Environmental
Compliance expenses for all Operations contemplated under the Program and
Budget.
 
9.3           Presentation of Programs and Budgets.  Proposed Programs and
Budgets shall be prepared by the Manager for a period of one fiscal year of the
Company or any longer period.  Each Program and Budget approved by the
Management Committee, regardless of length, shall be reviewed at least once each
fiscal year at the annual meeting of the Management Committee.  During the
period encompassed by any Program and Budgets, and at least sixty (60) prior to
its expiration, a proposed Program and Budget for the succeeding period shall be
prepared by the Manager and submitted to the Members.  Each such proposed
Program and Budget shall be in a form and degree of detail reasonably acceptable
to the Members.
 
 
27

--------------------------------------------------------------------------------

 
 
9.4           Review and Approval of Proposed Programs and Budgets.  Within
thirty (30) days after submission of a proposed Program and Budget, each Member
shall submit to the Management Committee:
 
(a)           Notice that the Member approves the proposed Program and Budget;
or
 
(b)           Proposed modifications of the proposed Program and Budget.
 
If a Member fails to give either of the foregoing responses within the allotted
time, the failure shall be deemed to be an approval by such Member of the
proposed Program and Budget.  If a Member makes a timely submission to the
Management Committee pursuant to Section 9.4(b), then the Management Committee
shall consider the submission in good faith; provided that nothing in this
Section 9.4 shall prevent the Management Committee from approving a Program and
Budget in the form originally submitted  to the Members.
 
9.5           Election to Participate During Joint Funding Period.  During the
Joint Funding Period, by notice to the Management Committee within twenty (20)
days after the final vote adopting a Program and Budget, a Member may elect to
contribute to such Program and Budget in some lesser amount than its respective
Percentage Interest, or may elect not to contribute any amount, in which cases
its Percentage Interest shall be recalculated as provided in Article VI.  If a
Member fails to so notify the Management Committee, the Member shall be deemed
to have elected to contribute to such Program and Budget in proportion to its
respective Percentage Interest as of the beginning of the period covered by the
Program and Budget.
 
9.6           Budget Overruns; Program Changes.
 
(a)           The Manager shall promptly notify the Management Committee of any
departure from an adopted Program and Budget by more than fifteen percent (15%).
 
(b)           Any departure from an adopted Program and Budget of more than
fifteen percent (15%), unless incurred in response to an emergency or unexpected
expenditure made pursuant to Section 9.7 or unless otherwise authorized by the
Management Committee, shall be at the sole cost and expense of the Member acting
as Manager and shall not constitute a Capital Contribution by the Member acting
as Manager.
 
(c)           Any departure from an adopted Program and Budget of fifteen
percent (15%) or less shall be borne by the Members, as Capital Contributions,
in proportion to their respective Percentage Interests as of the time the
overrun occurs.
 
9.7           Emergency or Unexpected Expenditures.  In case of emergency, the
Manager may take any reasonable action it deems necessary to protect life, limb
or property, to protect the Assets or to comply with Law.  The Manager may also
make reasonable expenditures for unexpected events which are beyond its
reasonable control and which do not result from a breach by it of its standard
of care.  The Manager shall promptly notify the Members of the emergency or
unexpected expenditure and the Manager shall be reimbursed for all resulting
costs by the non-managing Member in proportion to its respective Percentage
Interests at the time the emergency or unexpected expenditures are incurred;
provided that, during the Earn In Period, all such costs shall be funded out of
Royal’ s Initial Contribution and Earn In Contributions as applicable without
any reduction in Royal’s Percentage Interest. Expenditures permitted by this
Section 9.7, and amounts reimbursed pursuant to this Section 9.7 shall
constitute Capital Contributions.
 
 
28

--------------------------------------------------------------------------------

 
 
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.
 
10.2           Capital Calls.  During the Joint Funding Period, on the basis of
each approved Program and Budget, the Manager shall submit to each Member prior
to the last day of each month, a billing for estimated cash requirements for the
next month.  Within 10 days after receipt of each billing, each Member shall
advance to the Manager as a Capital Contribution to the Company its
proportionate share based on its Percentage Interest of the estimated
amount.  Time is of the essence of payment of such billings.  Subject to
available funds, the Manager shall at all times maintain a cash balance
approximately equal to the rate of disbursement for up to ten (10) days.  All
funds in excess of immediate cash requirements shall be invested by the Manager
for the benefit of the Business Account 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 Capital Calls.  Except as provided in
Section 9.5, a Member that fails to meet capital calls in the amount and at the
times specified in Section 10.2 shall be in default, and the amount of the
defaulted capital call shall bear interest from the date due at an annual rate
equal to five (5) percentage points over the Prime Rate, but in no event shall
said rate of interest exceed the maximum rate permitted by Law.  The
non-defaulting Member shall have those rights, remedies and elections specified
in Section 6.4.
 
ARTICLE XI
DISTRIBUTIONS; DISPOSITION OF PRODUCTION
 
11.1           Distributions.  The aggregate amount of all distributions to the
Members of cash and the timing of such distributions shall be determined by the
Management Committee.  Cash distributions shall be made to the Members in
accordance with their respective Percentage Interests.  In kind distributions to
the Members of Products shall be governed by Section 11.2.
 
11.2           Disposition of Production; No Distributions In Kind.  The Manager
shall dispose of Products under arrangements as may be approved by the
Management Committee from time to time.  Neither Member shall have the right or
the obligation to take distributions in kind or separately dispose of its share
of Products.
 
ARTICLE XII
DISSOLUTION OF THE COMPANY AND RESIGNATION OF A MEMBER
 
12.1           Dissolution.  The Company shall be dissolved only upon the
unanimous agreement of the Members.
 
 
29

--------------------------------------------------------------------------------

 
 
12.2           Resignation.  During the Earn In Period, prior to making any Earn
In Contributions, Royal may resign as a Member of the Company as provided in
Section 5.2(a).  During the Earn In Period, after making any Earn In
Contributions, Royal may elect to resign, and during the Joint Funding Period
either Member may elect to resign, as a Member of the Company by giving written
notice to the other Member of the effective date of the resignation, which shall
be the later of the end of the then current Program and Budget or at least
thirty (30) days after the date of the notice.  Upon any such resignation, the
Company shall acquire the resigning Member’s entire Membership Interest, free
and clear of security interests or other Liens arising by, through or under such
resigning Member, except those to which both Members have given their written
consent after the Effective Date, and such Membership Interest shall be
cancelled.  The resigning Member is entitled to receive no distribution upon
such resignation or any further consideration from the Company.  Any such
resignation under this Section 12.2 shall not relieve the resigning Member of
its obligations under Sections 4.9(c) and 6.5 (whether any liability with
respect thereto accrues before or after such resignation) arising out of
Operations conducted prior to such resignation.  If, during the Joint Funding
Period, a Member’s Percentage Interest is reduced to zero, the Member shall be
deemed to have resigned.
 
12.3           Liquidation and Termination After Dissolution.  Upon the
dissolution of the Company under Section 12.1, the Manager shall appoint in
writing one or more liquidators (including either Member or the Manager) who
shall have the authority set forth in Section 12.6.  The liquidator shall take
all action necessary to wind up the activities of the Company, and all costs and
expenses incurred in connection with the liquidation and termination of the
Company shall be expenses chargeable to the Company.  The liquidator may
determine which assets, if any, are to be distributed in kind, and shall sell or
otherwise dispose of all other assets of the Company.  All gain or loss with
respect to the assets (including assets distributed in kind) shall be allocated
among the Members in accordance with the applicable provisions of
Exhibit C.  Should a Member have a deficit balance in its Capital Account (after
giving effect to such allocations of gain or loss), the Member shall not be
obligated to make a contribution to the Company to restore all or any part of
such Capital Account deficit.  The Assets of the Company shall first be paid,
applied, or distributed in satisfaction of all liabilities of the Company to
third parties (or to making reasonable provision for the satisfaction thereof)
and then to satisfy any debts, obligations, or liabilities owed to the
Members.  Thereafter, any remaining cash and all other Assets shall be
distributed to the Members in accordance with Section 4.2 of Exhibit C.  Each
Member shall have the right to designate another Person to receive any property
that otherwise would be distributed in kind to that Member pursuant to this
Section 12.3.  Upon the completion of the winding up of the Company, the
liquidator shall cancel the certificate of formation of the Company and take
such other actions as may be reasonably necessary to terminate the continued
existence of the Company.
 
12.4           Non-Compete Covenants.  A Member that resigns or is deemed to
resign from the Company pursuant to Sections 5.2 or 12.2, or a Member that
transfers or forfeits its entire Membership Interest, shall not directly or
indirectly acquire any interest in Properties or other property within the Area
of Interest for twenty four (24) months after the effective date of the
resignation, forfeiture or transfer.  If a resigning, forfeiting or transferring
Member, or any Affiliate of the foregoing, breaches this Section 12.4, such
Member or Affiliate shall be obligated to offer to convey to the Company,
without cost, any such property or interest so acquired.  Such offer shall be
made in writing and can be accepted by the Company at any time within forty five
(45) days after it is received.
 
 
30

--------------------------------------------------------------------------------

 
 
12.5           Right to Data After Termination.  After the termination of the
continued existence of the Company pursuant to Section 12.3, each Member shall
be entitled to copies of all information acquired hereunder before the effective
date of termination not previously furnished to it, but a resigning Member, or a
Member that forfeits or transfers its entire Membership Interest, shall not be
entitled to any such copies after any such resignation.
 
12.6           Continuing Authority.  From and after the dissolution of the
Company under Section 12.1, the liquidator shall have the power and authority of
the Members, Manager and the Management Committee to do all things on behalf of
the Company which are reasonably necessary or convenient to:  (a) wind up the
Operations and the Company, (b) continue to operate the Properties and other
Assets of the Company during the winding up of the Operations and the Company
and (c) complete any transaction and satisfy any obligation, unfinished or
unsatisfied, at the time of such dissolution, if the transaction or obligation
arises out of Operations prior to such dissolution.  The liquidator 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 the Company, mortgage Assets, and take any other
reasonable action in any matter with respect to the Company or the Operations.
 
ARTICLE XIII
ACQUISITIONS WITHIN AREA OF INTEREST
 
13.1           General.  Any interest or right to acquire any interest in real
property (including any royalty interest) within the Area of Interest acquired
during the term of this Agreement by or on behalf of a Member or any Affiliate
shall be subject to the terms and provisions of this Agreement.
 
13.2           Notice to Non-Acquiring Member.  Within five (5) days after the
acquisition of any interest or the right to acquire any interest in real
property (including any royalty interest) wholly or partially within the Area of
Interest (except real property acquired by or on behalf of the Company pursuant
to a Program), the acquiring Member shall notify the other Member of such
acquisition.  The acquiring Member’s notice shall describe in detail the
acquisition, the lands and minerals covered thereby, the cost thereof.  In
addition to such notice, the acquiring Member shall make any and all information
concerning the acquired interest available for inspection by the other Member.
 
13.3           Option Exercised.  If, within ninety (90) days after receiving
the acquiring Member’s notice, the other Member notifies the acquiring Member of
its election to participate in the acquired interest, the acquiring Member or
its Affiliate shall convey to the Company (or to the other Member or another
entity as mutually agreed by the Members), by special warranty deed, its entire
acquired interest (or if to the other Member, a proportionate undivided interest
therein based on the Percentage Interests of the Members).  If conveyed to the
Company, the acquired interest shall become a part of the Properties for all
purposes of this Agreement immediately upon the notice of such other Member’s
election to participate therein.  Such other Member shall promptly pay to the
acquiring Member its proportionate share based on Percentage Interests of the
latter’s actual out-of-pocket acquisition costs; provided that, during the Earn
In Period, all such out-of-pocket acquisition costs shall be funded out of
Royal’ s Initial Contribution and Earn In Contributions as applicable without
any reduction in Royal’s Percentage Interest.
 
 
31

--------------------------------------------------------------------------------

 
 
13.4           Option Not Exercised.  If the other Member does not give such
notice within the ninety (90) day period set forth in Section 13.3, neither such
Member nor the Company shall have any interest in the acquired interest, and the
acquired interest shall not be a part of the Properties or otherwise be subject
to this Agreement.
 
ARTICLE XIV
ABANDONMENT AND SURRENDER OF PROPERTIES
 
14.1           Surrender or Abandonment of Property.  The Management Committee
may authorize the Manager to surrender or abandon part or all of the
Properties.  If the Management Committee authorizes any such surrender or
abandonment over the objection of a Member, the Company shall assign to the
objecting Member, by special warranty deed and without cost to the surrendering
Member, all of the Company’s interest in the property to be abandoned or
surrendered, and the abandoned or surrendered property shall cease to be part of
the Properties, the Company shall have no further right, title or interest
therein, and the objecting Member shall indemnify, defend and hold the Company
and the surrendering Member harmless from all obligations with respect to the
surrendered or abandoned Property whenever arising or occurring.
 
14.2           Reacquisition.  If any Properties are abandoned or surrendered
under the provisions of this Article XIV, then, unless this Agreement is earlier
terminated, neither Member nor any Affiliate thereof shall acquire any interest
in such Properties or a right to acquire an interest in properties comprising
the area of such Properties (or any greater or lesser area thereof) for a period
of twenty four (24) months following the date of such abandonment or
surrender.  If a Member reacquires any interest in properties in violation of
this Section 14.2, the other Member may elect by notice to the reacquiring
Member within forty five (45) days after it has actual notice of such
reacquisition, to have such properties contributed to the Company.  In the event
such an election is made, the reacquired properties shall thereafter be treated
as Properties, and the costs of reacquisition shall be borne solely by the
Member required to contribute such Properties to the Company, but shall not be
credited to the Capital Account of the contributing member or taken into account
for purposes of calculating the Members’ respective Percentage Interests.
 
ARTICLE XV
TRANSFER OF INTEREST
 
15.1           General.  A Member shall have the right to Transfer to any third
party all or any part of its Membership Interest or any economic interest
therein (including its right to receive distributions of cash or property from
the Company), solely as provided in this Article XV.
 
15.2           Limitations on Free Transferability.  The Transfer right of a
Member in Section 15.1 shall be subject to the following terms and conditions:
 
 
32

--------------------------------------------------------------------------------

 
 
(a)           No Transfer of a Membership Interest or any economic interest
therein shall be valid or recognized by the Company unless and until the
transferring Member has provided to the other Member notice of the Transfer, and
the transferee, as of the effective date of the Transfer, has committed in
writing to be bound by this Agreement to the same extent as the transferring
Member;
 
(b)           No Member, without the consent of the other Member, shall make a
Transfer which shall cause termination of the Company as a partnership for
Federal income tax purposes, provided, however, nothing contained herein shall
restrict the sale or transfer of any or all of the capital stock of CORE or
Royal;
 
(c)           No Transfer permitted by this Article XV shall relieve the
transferring Member of its share of any liability under this Agreement, whether
accruing before or after such Transfer, which arises out of Operations conducted
prior to such Transfer, including without limitation as provided in Section 6.5
unless such liability is expressly novated in an agreement between the
transferring Member, its transferee and the remaining Member;
 
(d)           As provided in Exhibit C, the transferring Member and the
transferee shall bear all tax consequences of the Transfer;
 
(e)           In the event of a Transfer of less than all of a Member’s
Membership Interest, the transferring Member and its transferee shall thereafter
act and be treated as one Member, with the Member with the greater Percentage
Interest hereby appointed the agent and attorney-in-fact of the Member with the
lesser Percentage Interest with respect to the exercise of all rights to vote,
consent, approve or otherwise make any decisions with respect to the management
or Operations or the Company;
 
(f)           If the Transfer is the grant of a security interest or other Lien
on a Membership Interest to secure a loan or other indebtedness of a Member,
such security interest or other Lien shall be subordinate to the terms of any
pledge securing any obligation of the Company or any obligation of the granting
Member to the Company or the other Member to the extent arising out or relating
to the Company.  In connection with any foreclosure, transfer in lieu, or other
enforcement of rights in the security interest, the acquiring third party shall
be bound by the terms of this Agreement, including without limitation,
Section 15.3, and shall acquire only the rights of an assignee of the Membership
Interest, and shall not, without the unanimous approval of the remaining
Members, be admitted to the Company as a Member;
 
(g)           No Member shall enter into any sale or other commitment or agree
to dispose of Products or proceeds from the sale of Products by such Member upon
distribution to it pursuant to Article XI if such sale or other commitment will
create in a third party a security interest in Products or proceeds therefrom
prior to any such distribution; and
 
(h)           If a Transfer is made which is contrary to Section 15.2(b) and
which causes termination of the Company as a partnership for Federal income tax
purposes, the transferring Member shall indemnify, defend and hold harmless the
other Member and its Affiliates from and against any and all loss, cost, expense
or damage arising from such termination.
 
 
33

--------------------------------------------------------------------------------

 
 
15.3           Transfer Provisions.  Any Transfer by either Member under this
Article XV and any Transfer by an Affiliate of Control of a Member shall be
subject to the transfer rights of the other Member to the extent provided in
Exhibit E.  Failure of a Member’s Affiliate to comply with this Article XV and
Exhibit E shall be a breach by such Member of this Agreement.
 
ARTICLE XVI
DISPUTES
 
16.1           Dispute Resolution.  All disputes between the Members arising
under or in connection with this Agreement which cannot be resolved by agreement
between the Members 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 Member 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.  If a Member substantially prevails on some aspects of such action,
but not on others, the court may apportion any award of costs and legal fees in
such manner as it deems equitable.
 
16.2           Forum Selection.  Each of Members irrevocably agrees that any
legal action or proceeding with respect to this Agreement or for recognition and
enforcement of any judgment in respect hereof brought by the other Member or its
successors or assigns may be brought and determined exclusively in the courts of
the State of Delaware or, if under applicable Law exclusive jurisdiction over
such matter is vested in the federal courts, any court of the United States
located in the State of Delaware, and each of the Parties to this Agreement
hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect to its property, generally and unconditionally, to the
exclusive jurisdiction of the aforesaid courts and agrees that it will not bring
any legal action or proceeding with respect to this Agreement or for recognition
and enforcement of any judgment in respect hereof in any court other than the
aforesaid courts.
 
ARTICLE XVII
CONFIDENTIALITY
 
17.1           General.  Each Member and Manager will keep confidential and not
use, reveal, provide or transfer to any third party any Confidential Information
it obtains or has obtained concerning the Company or the other Member without
the prior written consent of the other Member, which consent shall not be
unreasonably withheld.
 
17.2           Exceptions.  The consent required by Section 17.1 shall not apply
to a disclosure:
 
(a)           To a consultant, contractor, subcontractor, officer, director or
employee of the Company, the Manager or any Member or any of their respective
Affiliates that has a bona fide need to be informed;
 
(b)           To any third party to whom the disclosing Member or Manager
contemplates a Transfer of all or any part of its Membership Interest or the
Assets;
 
 
34

--------------------------------------------------------------------------------

 
 
(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 Member or the Company; or
 
(d)           To a governmental agency or to the public which the disclosing
Member or Manager believes in good faith is required by pertinent law or
regulation or rule of any stock exchange.
 
17.3           Limitations.
 
(a)           In any case to which Section 17.2 is applicable, the disclosing
Member or Manager shall, to the extent legally permitted, give notice to the
other Member concurrently with the making of such disclosure.  As to any
disclosure pursuant to Section 17.2(a), (b) or (c), only such Confidential
Information as such third party shall have a legitimate business need to know
shall be disclosed and such third party shall first agree in writing to protect
the Confidential Information from further disclosure to the same extent as the
Members are obligated under this Article XVII, and the disclosing Member or
Manager 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.
 
(b)           In any case to which Section 17.2(d) is applicable, the disclosing
Member  shall disclose only that portion of Confidential Information which such
Member believes in good faith is required by pertinent law or regulation or rule
of any stock exchange and shall take all reasonable steps to preserve the
confidentiality thereof.
 
(c)           Confidential Information disclosed by a Member under
Sections 17.2(a) through (c) shall be factual and not the product of
interpretation prepared by or on behalf of the Company or the other Member; it
being understood that a Member shall be entitled to disclose Confidential
Information under Sections 17.2(a) through (c) if:  (i) it is the product of
interpretation prepared by or on behalf of the disclosing Member for its own
purposes and (ii) the disclosing Member represents to its recipient that such
interpretive information was not prepared by or on behalf of, and does not
represent the opinion of, the Company or the other Member.
 
17.4           Public Announcements.  Prior to making or issuing any press
release or other public announcement or disclosure of Confidential Information,
a Member shall first consult with the other Member as to the content and timing
of such announcement or disclosure, unless in the good faith judgment of such
Member, there is not sufficient time to consult with the other Member before
such announcement or disclosure must be made under applicable Laws; but in such
event, the disclosing Member shall notify the other Member, as soon as possible,
of the pendency of such announcement or disclosure, and it shall notify the
other Member before such announcement or disclosure is made if at all reasonably
possible.
 
17.5           Duration of Confidentiality.  The provisions of this Article XVII
shall apply to a Member or Manager until the earlier of (a) the date that is two
(2) years after the cancellation of the certificate of formation of the Company
(notwithstanding the resignation of such Member or Manager or the Transfer by
such Member of its entire Membership Interest), and (b) the date that is two (2)
years after the resignation of such Member or Manager or, in the case of a
Member, the Transfer by such Member of its entire Membership Interest; provided
that with respect to any Confidential Information that constitutes “trade
secrets” of a Member (or of the Company, to the extent distributed or otherwise
assigned to a Member pursuant to this Agreement) under the Uniform Trade Secrets
Act or similar applicable laws, the provisions of this Article XVII shall
survive indefinitely.
 
 
35

--------------------------------------------------------------------------------

 
 
ARTICLE XVIII
GENERAL PROVISIONS
 
18.1           Notices.  All notices, payments and other required communications
(“Notices”) to the Members or Manager shall be in writing, and shall be given
(i) by personal delivery to the applicable Member or Manager, or (ii) by
electronic communication, with a confirmation sent by registered or certified
mail return receipt requested, or (iii) by registered or certified mail return
receipt requested.  All Notices shall be effective and shall be deemed delivered
(a) if by personal delivery on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business hours, on the next
business day following delivery, (b) if by electronic communication on the next
business day following receipt of the electronic communication, and (c) if
solely by mail on the next business day after actual receipt.  A Member or
Manager may change its address by Notice to the other Member.  The contact
details for the Members, initially, are as follows:

 

  If to CORE:
3700 Buffalo Speedway, Suite 925
   
Houston, Texas 77098
   
Attention:       Brad Juneau
   
Telephone:  (713) 877-1311
   
Facsimile:   (713) 621-7329
   
 
With a copy to:
 
   
Morgan, Lewis & Bockius LLP
   
300 South Grand Avenue, 22nd Floor
   
Los Angeles, California 90071
   
Attention:      Richard A. Shortz
   
Telephone:    (213) 612-2526
   
Facsimile:      (213) 612-2501
 
  If to Royal:
1660 Wynkoop Street, Suite 1000
   
Denver, Colorado 80202
   
Attention:        General Counsel
   
Telephone:      (303) 573-1660
   
Facsimile:        (303) 595-9385

 
18.2           Interpretation.  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.
 
 
36

--------------------------------------------------------------------------------

 
 
18.3           Currency.  All references to “Dollars” or “$” herein shall mean
lawful currency of the United States of America.
 
18.4           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.
 
18.5           Waiver.  The failure of a Member or Manager 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 the Member’s or Manager’s right thereafter
to enforce any provision or exercise any right.
 
18.6           Modification.  No modification of this Agreement shall be valid
unless made in writing and duly executed by all of the Members.
 
18.7           Force Majeure.  Except for any obligation to make payments when
due hereunder, the obligations of a Member or the Manager 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 Member or Manager to grant);
acts of God; laws, regulations, orders, proclamations, 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
federal, state or local environmental standards; acts of war or terrorism or
conditions arising out of or attributable to war or terrorism, whether declared
or undeclared; riot, civil strife, insurrection, insurgency or rebellion; fire,
explosion, earthquake, storm, flood, sink holes, drought, hurricane, tsunami 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; or any other cause whether
similar or dissimilar to the foregoing.  The affected Member or Manager shall
promptly give notice to the other Member of the suspension of performance,
stating therein the nature of the suspension, the reasons therefor, and the
expected duration thereof.  The affected Member or Manager shall resume
performance as soon as reasonably possible.  During the period of suspension the
obligations of the Members to advance funds pursuant to Section 10.2 shall be
reduced to levels consistent with Operations.
 
18.8           Governing Law.  Except for matters of title to the Properties or
their Transfer, which shall be governed by the Law of their situs, this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Delaware, except for its rules pertaining to conflicts of laws.
 
18.9           Rule Against Perpetuities.  Any right or option to acquire any
interest in real or personal property under this Agreement must be exercised, if
at all, so as to vest such interest in the acquirer within 21 years after the
Effective Date.
 
 
37

--------------------------------------------------------------------------------

 
 
18.10           Further Assurances.  Each Member and the Manager agrees to take
from time to time such 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.
 
18.11           Survival of Terms and Conditions.  The following Sections shall
survive the dissolution, liquidation and termination of the Company, any
Transfer of a Membership Interest or other interest in the Company to the full
extent necessary for their enforcement and the protection of the Member, Manager
or other person in whose favor they run: Article II, Sections 4.9, 5.2(b)-(d),
5.4, 6.5, 6.6, 8.3, Article XII, Article XIII, Article XVI, Article XVII, and
Article XVIII.
 
18.12           No Third Party Beneficiaries.  Except as specifically provided
in Sections 4.9 and 15.2(h), this Agreement is for the sole benefit of the
Members and the Manager, and no other Person, including without limitation, any
creditor of any Member, is intended to be a beneficiary of this Agreement or
shall have any rights hereunder.
 
18.13           Entire Agreement; Successors and Assigns.  This Agreement,
together with the Exhibits hereto, contains the entire understanding of the
Members and the Manager with respect to the Company and supersedes all prior
agreements and understandings 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 Members and the Manager.  In the event
of any conflict between this Agreement and any Exhibit attached hereto, the
terms of this Agreement shall be controlling.
 
[Signatures on Next Page]
 
 
38

--------------------------------------------------------------------------------

 

 
IN WITNESS WHEREOF, the following parties have executed this Agreement, as
Members, as of the date first above written.
 
 

  Core Alaska, LLC                      
 
By:
/s/ John B. Juneau     Name:  John B. Juneau     Title:  President and Chief
Executive Officer          

 

  Royal Alaska, LLC                      
 
By:
/s/ William Heissenbuttel     Name: William Heissenbuttel     Title: Vice
President