Lincoln Hill LLC Operating Agreement

This Limited Liability Company Operating Agreement is made as of April 8, 2004
(the “Effective Date”) between Western Goldfields, Inc., an Idaho corporation
(“WGI”), and Coolcharm Gold Mining Company Ltd., a company registered in England
& Wales (“Coolcharm”).

Recitals

A.  WGI owns or controls certain properties (collectively the “Properties”) in
Pershing County, Nevada, which properties are described in Exhibit A and defined
in Exhibit D.

B.  WGI and Coolcharm entered into a letter agreement dated effective April 8,
2004 (the “Letter Agreement”), pursuant to which WGI granted to Coolcharm the
exclusive right to explore, evaluate and develop the Properties and the option
to earn and purchase from WGI an undivided sixty percent (60%) interest in and
to the Properties. In addition, the parties agreed to enter into a joint venture
agreement for the joint exploration, development and, if warranted, mining,
production and marketing of minerals from the Properties.

C.  Under the Letter Agreement, the parties contemplated the execution and
delivery of a definitive agreement for the formation and operation of a joint
venture limited liability company, which the Members’ Agreement and this
Agreement represent.

Now therefore, in consideration of their covenants and promises, WGI and
Coolcharm agree as follows:

1.  Definitions and Cross-references.

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

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

2.  Name, Purposes and Term.

2.1  Formation. The Company has been duly organized pursuant to the Act and the
provisions of this Agreement as a Nevada limited liability company by the filing
of its Articles of Organization (as defined in the Act) in the Office of the
Secretary of the State of Nevada effective as of the Effective Date.

2.2  Name. The name of the Company is “Lincoln Hill LLC” and such other name or
names complying with the Act as the Manager shall determine. The Manager shall
accomplish any filings or registrations required by jurisdictions in which the
Company conducts its Business.
 
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2.3  Purposes. The Company is formed for the following purposes and for no
others, and shall serve as the exclusive means by which each of the Members
accomplishes such purposes:

2.3.1  To conduct Exploration within the Area of Interest,

2.3.2  To acquire additional real property and other interests within the Area
of Interest,

2.3.3  To evaluate the possible Development and Mining of the Properties, and,
if justified, to engage in Development and Mining,

2.3.4  To engage in Operations on the Properties,

2.3.5  To engage in marketing Products,

2.3.6  To complete and satisfy all Environmental Compliance obligations and
Continuing Obligations affecting the Properties, and

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

2.4  LimitationLimitation. Unless the Members otherwise agree in writing, the
Business of the Company shall be limited to the purposes described in Section
2.3, and nothing in this Agreement shall be construed to enlarge such purposes.

2.5  TermTerm. The term of the Company shall begin on the Effective Date and
shall continue for twenty (20) years from the Effective Date and for so long
thereafter as Products are produced from the Properties on a continuous basis,
and thereafter until all materials, supplies, equipment and infrastructure have
been salvaged and disposed of, and any required Environmental Compliance is
completed and accepted, unless the Company is earlier terminated as herein
provided. For purposes hereof, Products shall be deemed to be produced from the
Properties on a “continuous basis” so long as production in commercial
quantities is not halted for more than one hundred eighty (180) consecutive
days.

2.6  Resident Agent; Offices. The Manager shall select a duly qualified resident
agent for the company. The registered office of the Company in the State of
Nevada shall be located at 961 Matley Lane, Suite 120, Reno, Nevada 89502 or at
any other place within the State of Nevada which the Manager shall select. The
principal office of the Company shall be at any other location which the Manager
shall select.
 
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3.  Contributions by Members.Contributions by Members.

3.1  Members’ Initial Contributions.  

3.1.1  WGI shall contribute to the capital of the Company its Initial
Contribution as described in Section 3.1 of the Members’ Agreement.
 
3.1.2  Coolcharm shall contribute to the capital of the Company its Initial
Contribution as described in Section 3.2 of the Members’ Agreement.

3.1.3  All information developed by WGI, Coolcharm and the Company during the
term of the Members’ Agreement and this Agreement shall be Assets of the
Company.
 
3.1.4  Upon Coolcharm’s performance of its obligations under Sections 2.1 and
2.2 of the Members’ Agreement and its Initial Contribution, the amount of
Coolcharm’s Qualifying Expenses, including those actually incurred or paid in
cash to WGI in accordance with Section 3.2 of the Members’ Agreement shall be
credited to Coolcharm’s Equity Account. At such time, there shall be credited to
WGI’s Equity Account the amount equal to the product of Coolcharm’s Equity
Account multiplied by two-thirds (2/3).

3.2  Failure to Make Initial Contribution.

3.2.1  Coolcharm’s failure to make its Initial Contribution in accordance with
the provisions of this Section, if not cured within thirty (30) days after
notice by WGI of such default, shall be deemed to be a resignation of Coolcharm
from the Company, the termination of its membership in the Company and a
transfer of its Ownership Interest and Capital Account to WGI. Subject to
Section 3.2.2 below, Coolcharm’s resignation shall be effective upon such
failure. Upon such event, Coolcharm shall have no further right, title or
interest in the Company or the Assets and it shall take such actions as are
necessary to ensure that all Assets are free and clear of any Encumbrances
arising by, through or under it, except for such Encumbrances to which the
Members may have agreed.

3.2.2  Notwithstanding Section 3.2.1 above, if during any expenditure period
Coolcharm fails to pay the Qualifying Expenses required for its Initial
Contribution in accordance with the provisions of Section 3.1.2, Coolcharm, in
its discretion, may elect to pay to WGI an amount equal to one-half (1/2) of the
balance of the Qualifying Expenses for such expenditure period in accordance
with Section 3.2 of the Members’ Agreement. Coolcharm must elect to exercise and
to perform its right to pay WGI, if at all, within thirty (30) days after the
end of the expenditure period for which the full amount of the Qualifying
Expenses were not incurred. If Coolcharm timely and properly exercises and
performs the option to pay WGI in lieu of performance of its Initial
Contribution obligation for such expenditure period, Coolcharm shall be deemed
to have performed its Initial Contribution obligation for such expenditure
period, subject to its continuing obligations under Section 3.2 of the Members’
Agreement. If Coolcharm fails to timely and properly exercise and perform its
obligation to pay WGI for Qualifying Expenses in lieu of performance of its
Initial Contribution obligation, such event shall be deemed to be a resignation
of Coolcharm from the Company, the termination of its membership in the Company
and a transfer of its Ownership Interest and Capital Account to WGI. Coolcharm’s
resignation shall be effective upon such failure. Upon such event, Coolcharm
shall have no further right, title or interest in the Company or the Assets and
its shall take such actions as are necessary to ensure that all Assets are free
and clear of any Encumbrances arising by, through or under it, except for such
Encumbrances to which the Members may have agreed.

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3.3  Record Title. Title to the Assets shall be held by the Company.

4.  Interests of Members.

4.1  Initial Ownership Interests. The Members shall have the following initial
Ownership Interests:

                        WGI           
40% 

                        Coolcharm        
60%

4.2  Changes in Ownership Interests. The Ownership Interests shall be eliminated
or changed as follows:

4.2.1  Upon resignation or deemed resignation as provided in Sections 3.2, 4.4,
and Section 14;

4.2.2  Upon an election by either Member pursuant to Section 10.5 to contribute
less to an adopted Program and Budget than the percentage equal to its Ownership
Interest, or to contribute nothing to an adopted Program and Budget;

4.2.3  In the event of default by either Member in making its agreed-upon
contribution to an adopted Program and Budget, followed by an election by the
other Member to invoke any of the remedies in Section 11.5;

4.2.4  Upon Transfer by either Member of part or all of its Ownership Interest
in accordance with Section 7; or
 
4.2.5  Upon acquisition by either Member of part or all of the Ownership
Interest of the other Member, however arising.

4.3  Admission of New Members. Except in the event of a transfer permitted
pursuant to Section 7, a new member may be admitted only with the unanimous
written approval of the Members.

4.4  Conversion and Elimination of Minority Interest. The provisions of Sections
4.4.1 and 4.4.2 shall apply if after Coolcharm’s completion of its Initial
Contribution and vestment of its Ownership Interest the Company completes a
bankable Feasibility Study which supports the development of a mine having
proven reserves of not less than one hundred fifty thousand (150,000) troy
ounces of gold and both Members elect to participate in the initial Development
Program and Budget and, following such event, a Member’s Ownership Interest is
diluted to less than twenty percent (20%). The provisions of Section 4.4.3 shall
apply if on Coolcharm’s completion of its Initial Contribution and vestment of
its Ownership Interest the Company completes a bankable Feasibility Study which
supports the Development of a mine having proven reserves of not less than one
hundred fifty thousand (150,000) troy ounces of gold and a Member elects to
convert its Ownership Interest before such party elects to participate in the
initial Development Program and Budget.
 
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4.4.1  A Reduced Member whose Recalculated Ownership Interest becomes less than
twenty percent (20%) shall be deemed to have withdrawn from the Company and
shall relinquish its entire Ownership Interest free and clear of any
Encumbrances arising by, through or under the Reduced Member, except any such
Encumbrances listed in Section 1.1 of Exhibit A or to which the Members have
agreed. Such relinquished Ownership Interest shall be deemed to have accrued
automatically to the other Member. The Reduced Member’s Capital Account shall be
transferred to the remaining Member. The Reduced Member shall have the right to
receive twenty percent (20%) of Net Proceeds, if any, or a mineral production
royalty equal to two and one-half percent (2.5%) of the Net Smelter Returns from
the production of minerals from the Properties. Upon relinquishment of its
ownership interest, the Reduced Member shall thereafter have no further right,
title, or interest in the Assets, in the Company or under this Agreement, and
the tax partnership established by Exhibit C shall dissolve pursuant to Section
4.2 of Exhibit C. In such event, the Reduced Member shall execute and deliver an
appropriate conveyance of any right, title and interest the Reduced Member may
have in the Assets to the remaining Member.

4.4.2  The relinquishment, resignation and entitlements for which this Section
provides shall be effective as of the effective date of the recalculation under
Sections 10.5 or 11.5. However, if the final adjustment provided under Section
10.6 for any recalculation under Section 10.5 results in a Recalculated
Ownership Interest of twenty percent (20%) or more: (1) the Recalculated
Ownership Interest shall be deemed, effective retroactively as of the first day
of the Program Period, to have automatically revested; (2) the Reduced Member
shall be reinstated as a Member, with all of a Member’s rights and obligations;
(3) the right to Net Proceeds or the Net Smelter Returns Royalty under
Section 4.4.1 shall terminate; and (4) the Manager, on behalf of the Members,
shall make any necessary reimbursements, reallocations of Products,
contributions and other adjustments as provided in Section 10.6.4. Similarly, if
such final adjustment under Section 10.6 results in a Recalculated Ownership
Interest for either Member of less than twenty percent (20%) for a Program
Period as to which the provisional calculation under Section 10.5 had not
resulted in an Ownership Interest of less than twenty percent (20%), then such
Member, at its election within thirty (30) days after notice of the final
adjustment, may contribute an amount resulting in a revised final adjustment and
resultant Recalculated Participating Interest of twenty percent (20%). If no
such election is made, such Member shall be deemed to have withdrawn under the
terms of Section 4.4.1 as of the beginning of such Program Period, and the
Manager, on behalf of the Members, shall make any necessary reimbursements,
reallocations of Products, contributions and other adjustments as provided in
Section 10.6.4, including of any Net Proceeds or Net Smelter Returns Royalty to
which such Member may be entitled for such Program Period.
 
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4.4.3  On the Management Committee’s approval of a Development Program and
Budget in accordance with Section 10.10, a Member shall have the right to elect
to withdraw from the Company, relinquish its entire Ownership Interest free and
clear of any Encumbrances arising by, through or under the Reduced Member and
convert its interest to the right to receive twenty percent (20%) of Net
Proceeds, if any, or two and one-half percent (2.5%) of Net Smelter Returns
Royalty in the manner described in Section 4.4.1 above. If both parties elect to
convert their Ownership Interest in accordance with this Section, the Members
shall be deemed to have unanimously agreed to dissolve the Company, and the
Company shall be dissolved in accordance with Section 14.

4.5  Documentation of Adjustments to Ownership Interests. Each Member’s
Ownership Interest and related Equity Account balance shall be shown in the
accounting records of the Company, and any adjustments, including any reduction,
readjustment, and restoration of Ownership Interests under Sections 4.4, 10.5,
10.6 and 11.5, shall be made monthly. The Schedule of Members attached hereto
shall be amended from time to time to reflect such changes.

5.  Relationship of the Members.

5.1  Limitation on Authority of Members. No Member is an agent of the Company
solely by virtue of being a Member, and no Member has authority to act for the
Company solely by virtue of being a Member. This Section 5.1 supersedes any
authority granted to the Members pursuant to the Act. Any Member that takes any
action or binds the Company in violation of this Section 5.1 shall be solely
responsible for any loss and expense incurred by the Company as a result of the
unauthorized action and shall indemnify and hold the Company harmless with
respect to the loss or expense.

5.2  Federal Tax Elections and Allocations. The Company shall be treated as a
partnership for federal income tax purposes, and no Member shall take any action
to alter such treatment.

5.3  State Income Tax. To the extent permissible under applicable law, the
relationship of the Members shall be treated for state income tax purposes in
the same manner as it is for federal income tax purposes.

5.4  Tax Returns. After approval of the Management Committee, any tax returns or
other required tax forms shall be filed in accordance with Exhibit C.

5.5  Other Business Opportunities. Each Member shall have the right to engage in
and receive full benefits from any independent business activities or
operations, whether or not competitive with the Company, without consulting
with, or obligation to, the other Member or the Company. The doctrines of
“corporate opportunity” or “business opportunity” shall not be applied to the
Business nor to any other activity or operation of any Member. No Member shall
have any obligation to the Company or any other Member with respect to any
opportunity to acquire any property outside the Area of Interest at any time, or
within the Area of Interest after the termination of the Company. Unless
otherwise agreed in writing, neither the Manager nor any Member shall have any
obligation to mill, beneficiate or otherwise treat any Products in any facility
owned or controlled by the Manager or such Member.
 
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5.6  Waiver of Rights to Partition or Other Division of Assets. The Members
waive and release all rights of partition, or of sale in lieu thereof, or other
division of Assets, including any such rights provided by Law.

5.7  Bankruptcy of a Member. A Member shall cease to have any power as a Member
or Manager or any voting rights or rights of approval hereunder upon bankruptcy,
insolvency, dissolution or assignment for the benefit of creditors of such
Member, and its successor upon the occurrence of any such event shall have only
the rights, powers and privileges of a transferee enumerated in Section 7.2, and
shall be liable for all obligations of the Member under this Agreement. In no
event, however, shall a personal representative or successor become a substitute
Member unless the requirements of Section 7.2 are satisfied.

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

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

5.10  Disposition of Production. Neither Member shall have any obligation to
account to the other Member for, nor have any interest or right of participation
in any profits or proceeds nor have any obligation to share in any losses from,
futures contracts, forward sales, trading in puts, calls, options or any similar
hedging, price protection or marketing mechanism employed by a Member with
respect to its proportionate share of any Products produced or to be produced
from the Properties.

5.11  Limitation of Liability. The Members shall not be required to make any
contribution to the capital of the Company except as otherwise provided in this
Agreement, nor shall the Members in their capacity as Members or Manager be
bound by, or liable for, any debt, liability or obligation of the Company
whether arising in contract, tort, or otherwise, except as expressly provided by
this Agreement. The Members shall be under no obligation to restore a deficit
Capital Account upon the dissolution of the Company or the liquidation of any of
their Ownership Interests.

5.12  Indemnities. The Company may, and shall have the power to, indemnify and
hold harmless any Member or Manager or other person from and against any and all
claims and demands whatsoever arising from or related to the Business, the
Company or a Member’s membership in the Company.

5.13  No Third Party Beneficiary Rights. This Agreement shall be construed to
benefit the Members and their respective successors and assigns only, and shall
not be construed to create third party beneficiary rights in any other party or
in any governmental organization or agency.
 
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6.  Representations and Warranties. As of the Effective Date, each Member
warrants and represents to the other that:

6.1  It is a corporation duly organized and in good standing in its state of
incorporation 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;

6.2  It has the capacity to enter into and perform this Agreement and all
transactions contemplated herein and that all corporate, board of directors,
shareholder, surface and mineral rights owner, lessor, lessee and other actions
and consents required to authorize it to enter into and perform this Agreement
have been properly taken or obtained;

6.3  It will not breach any other agreement or arrangement by entering into or
performing this Agreement;

6.4  It is not subject to any governmental order, judgment, decree, debarment,
sanction or Laws that would preclude the permitting or implementation of
Operations under this Agreement; and

6.5  This Agreement has been duly executed and delivered by it and is valid and
binding upon it in accordance with its terms.

7.  Transfer of Interest; Preemptive Right.

7.1  General. A Member shall have the right to Transfer to a third party its
Ownership Interest, or any beneficial interest therein, solely as provided in
this Section 7.

7.2  Limitations on Free Transferability. Any Transfer by either Member under
Section 7.1 shall be subject to the following limitations:

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

7.2.2  No transferee of all or any part of a Member’s Ownership Interest shall
have the rights of a Member unless and until the transferring Member has
provided to the other Member notice of the Transfer, and, except as provided in
Sections 7.2.6 and 7.2.7, the transferee, as of the effective date of the
Transfer, has committed in writing to assume and be bound by this Agreement to
the same extent as the transferring Member;

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

7.2.4  No Transfer permitted by this Section shall relieve the transferring
Member of any liability of such transferring Member under this Agreement,
whether accruing before or after such Transfer;

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7.2.5  Any Member that makes a Transfer that shall cause termination of the tax
partnership established by Section 5.2 shall indemnify the other Member for,
from and against any and all loss, cost, expense, damage, liability or claim
therefore arising from the Transfer, including without limitation any increase
in taxes, interest and penalties or decrease in credits caused by such
termination and any tax on indemnification proceeds received by the indemnified
Member;
 
7.2.6  In the event of a Transfer of less than all of an Ownership Interest, the
transferring Member and its transferee shall act and be treated as one Member
under this Agreement; provided however, that in order for such Transfer to be
effective, the transferring Member and its transferee must first:

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

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

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

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

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

The transferring Member and its transferee may change the Agent (but such
replacement must be one of them) by giving notice to the other Member, which
notice must conform to Section 7.2.6.2.

7.2.7  If the Transfer is the grant of an Encumbrance on an Ownership Interest
to secure a loan or other indebtedness of either Member in a bona fide
transaction, other than a transaction approved unanimously by the Management
Committee or Project Financing approved by the Management Committee, such
Encumbrance shall be granted only in connection with such Member’s financing
payment or performance of that Member’s obligations under this Agreement and
shall be subject to the terms of this Agreement and the rights and interests of
the other Member hereunder. Any such Encumbrance shall be further subject to the
condition that the holder of such Encumbrance (AChargee@) first enters into a
written agreement with the other Member in form satisfactory to the other
Member, acting reasonably, binding upon the Chargee, to the effect that:
 
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7.2.7.1  The Chargee shall not enter into possession or institute any
proceedings for foreclosure or partition of the encumbering Member’s Ownership
Interest and that such Encumbrance shall be subject to the provisions of this
Agreement;

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

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

7.3  Preemptive Right. Any Transfer by either Member under Section 7.1 and any
Transfer by an Affiliate in Control of either Member shall be subject to a
preemptive right of the other Member to the extent provided in Exhibit H.
Failure of a Member’s Affiliate to comply with this Section and Exhibit H shall
be a breach by such Member of this Agreement.

8.  Management Committee.

8.1  Organization and Composition. The Members establish a Management Committee
to determine overall policies, objectives, procedures, methods and actions under
this Agreement. The Management Committee shall consist of five (3) member(s). So
long as WGI is the Manager during the Earn-in-Period, the Management Committee
shall consist of two (2) members appointed by WGI and one (1) members appointed
by Coolcharm. If WGI does not elect to act as Manager or resigns as Manager
during the Earn-in-Period, the Management Committee shall consist of two (2)
members appointed by Coolcharm and one (1) members appointed by WGI. On
Coolcharm’s completion of its obligations under the Members’ Agreement and its
Initial Contribution, Coolcharm shall have the right to elect to become the
Manager.

8.2  Decisions. During Coolcharm’s performance of it Initial Contribution
obligation (the “Earn-in Period”), decisions of the Management Committee shall
be determined by the vote of a majority of the members of the Management
Committee. After Coolcharm has completed its Initial Contribution, each Member,
acting through its appointed member(s) in attendance at the meeting, shall have
the votes on the Management Committee in proportion to its Ownership Interest.
Except as otherwise provided in this Agreement, the vote of the Member with an
Ownership Interest over fifty (50%) shall determine the decisions of the
Management Committee.
 
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8.3  Meetings.

8.3.1  After Coolcharm has completed its Initial Contribution, the Management
Committee shall hold regular meetings at least quarterly in Reno, Nevada, or at
other agreed places. The Manager shall give fifteen (15) days notice to the
Members of such meetings. Additionally, either Member may call a special meeting
upon seven (7) days notice to the other Member. In case of an emergency,
reasonable notice of a special meeting shall suffice. There shall be a quorum if
at least one member of the Management Committee representing each Member is
present; provided, however, that if a Member fails to attend two consecutive
properly called meetings, then a quorum shall exist at the second meeting if the
other Member is represented by at least one appointed member, and a vote of such
Member shall be considered the vote required for the purposes of the conduct of
all business properly noticed even if such vote would otherwise require
unanimity.

8.3.2  If business cannot be conducted at a regular or special meeting due to
the lack of a quorum, either Member may call the next meeting upon five (5) days
notice to the other Member.

8.3.3  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 any matters may be considered if either
Member adds the matter to the agenda at least five (5) days before the meeting
or with the consent of the other Member. The Manager shall prepare minutes of
all meetings and shall distribute copies of such minutes to the other Member
within five (5) days after the meeting. Either Member may electronically record
the proceedings of a meeting with the consent of the other Member. The other
Member shall sign and return or object to the minutes prepared by the Manager
within thirty (30) days after receipt, and failure to do either shall be deemed
acceptance of the minutes as prepared by the Manager. The minutes, when signed
or deemed accepted by both Members, shall be the official record of the
decisions made by the Management Committee. Decisions made at a Management
Committee meeting shall be implemented in accordance with adopted Programs and
Budgets. If a Member timely objects to minutes proposed by the 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 charged to the Business Account. All other costs shall be paid by the
Members individually.
 
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8.4  Action Without Meeting in Person. In lieu of meetings in person, the
Management Committee may conduct meetings by telephone or video conference, so
long as minutes of such meetings are prepared in accordance with Section 8.3.3.
The Management Committee may also take actions in writing signed by all members
of the Management Committee.

8.5  Matters Requiring Approval. Except as provided in Section 3.1.3 and as
otherwise delegated to the Manager in Section 9.2, the Management Committee
shall have exclusive authority to determine all matters related to overall
policies, objectives, procedures, methods and actions under this Agreement.

9.  Manager.

9.1  Appointment. The Members appoint WGI as the Manager with overall management
responsibility for Operations. WGI agrees to serve until it resigns as provided
in Section 9.4 or until Coolcharm completes its Initial Contribution at which
time Coolcharm may elect to act as Manager.

9.2  Powers and Duties of Manager. Subject to the terms and provisions of this
Agreement, the Manager shall have the following powers and duties, which shall
be discharged in accordance with adopted Programs and Budgets.

9.2.1  The Manager shall manage, direct and control Operations, and shall
prepare and present to the Management Committee proposed Programs and Budgets as
provided in Section 10. The parties acknowledge their intent that the Company
will conduct its Operations in a prudent and reasonable manner with the goal of
exploring for and identifying minerals on the Properties which support
preparation of a pre-Feasibility Study and Feasibility Study, and that the
Manager will act in a reasonably diligent manner in its conduct of Operations
consistent with the Company’s purpose and goal.

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

9.2.3  The Manager shall use reasonable efforts to: (1) purchase or otherwise
acquire all material, supplies, equipment, water, utility and transportation
services required for Operations, such purchases and acquisitions to be made to
the extent reasonably possible on the best terms available, taking into account
all of the circumstances; (2) obtain such customary warranties and guarantees as
are available in connection with such purchases and acquisitions; and (3) keep
the Assets free and clear of all Encumbrances, except any such Encumbrances
listed in Section 1.1 of Exhibit A and those existing at the time of, or created
concurrent with, the acquisition of such Assets, or mechanic’s or materialmen’s
liens (which shall be contested, released or discharged in a diligent matter) or
Encumbrances specifically approved by the Management Committee.

9.2.4  The Manager shall conduct such title examinations of the Properties and
cure such title defects pertaining to the Properties as may be advisable in its
reasonable judgment.
 
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9.2.5  The Manager shall: (1) make or arrange for all payments required by
leases, licenses, permits, contracts and other agreements related to the Assets;
(2) pay all taxes, assessments and like charges on Operations and Assets except
taxes determined or measured by a Member’s sales revenue or net income and
taxes, including production taxes, attributable to a Member’s share of Products,
and shall otherwise promptly pay and discharge expenses incurred in Operations;
provided, however, that if authorized by the Management Committee, the Manager
shall have the right to contest (in the courts or otherwise) the validity or
amount of any taxes, assessments or charges if the Manager deems them to be
unlawful, unjust, unequal or excessive, or to undertake such other steps or
proceedings as the Manager may deem reasonably necessary to secure a
cancellation, reduction, readjustment or equalization thereof before the Manager
shall be required to pay them, but in no event shall the Manager permit or allow
title to the Assets to be lost as the result of the nonpayment of any taxes,
assessments or like charges; and (3) do all other acts reasonably necessary to
maintain the Assets.

9.2.6  The Manager shall: (1) apply for all necessary permits, licenses and
approvals; (2) comply with all Laws; (3) notify promptly the Management
Committee of any allegations of substantial violation thereof; and (4) prepare
and file all reports or notices required for or as a result of Operations. The
Manager shall not be in breach of this provision if a violation has occurred in
spite of the Manager’s good faith efforts to comply consistent with its standard
of care under Section 9.3. In the event of any such violation, the Manager shall
timely cure or dispose of such violation on behalf of both Members through
performance, payment of fines and penalties, or both, and the cost thereof shall
be charged to the Business Account.

9.2.7  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. 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 obliga-tions in excess of Fifty Thousand
Dollars ($50,000.00) in cash or value.

9.2.8  The Manager shall obtain insurance for the benefit of the Company as
provided in Exhibit F or as may otherwise be determined from time to time by the
Management Committee.

9.2.9  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 Section 12.2. Without prior
authorization from the Management Committee, however, the Manager shall not:
(1) dispose of Assets in any one transaction (or in any series of related
transactions) having a value in excess of Fifty Thousand Dollars ($50,000.00);
(2) enter into any sales contracts or commitments for Product, except as
permitted in Section 5.10; (3) begin a liquidation of the Company; or
(4) dispose of all or a substantial part of the Assets necessary to achieve the
purposes of the Company.

9.2.10  The Manager shall have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent contractors.
 
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9.2.11  The Manager shall perform or cause to be performed all assessment and
other work, and shall pay all Governmental Fees, required by Law in order to
maintain the unpatented mining claims, mill sites and tunnel sites included
within the Properties. The Manager shall have the right to perform the
assessment work required hereunder pursuant to a common plan of exploration and
continued actual occupancy of such claims and sites shall not be required. The
Manager shall not be liable on account of any determination by any court or
governmental agency that the work performed by the Manager does not constitute
the required annual assessment work or occupancy for the purposes of preserving
or maintaining ownership of the claims, provided that the work done is pursuant
to an adopted Program and Budget and is performed in accordance with the
Manager’s standard of care under Section 9.3. The Manager shall timely record
with the appropriate county and file with the appropriate United States agency
any required affidavits, notices of intent to hold and other documents in proper
form attesting to the payment of Governmental Fees, the performance of
assessment work or intent to hold the claims and sites, in each case in
sufficient detail to reflect compliance with the requirements applicable to each
claim and site. The Manager shall not be liable on account of any determination
by any court or governmental agency that any such document submitted by the
Manager does not comply with applicable requirements, provided that such
document is prepared and recorded or filed in accordance with the Manager’s
standard of care under Section 9.3.
 
9.2.12  If authorized by the Management Committee, the Manager may: (1) locate,
amend or relocate any unpatented mining claim or mill site or tunnel site,
(2) locate any fractions resulting from such amendment or relocation, (3) apply
for patents or mining leases or other forms of mineral tenure for any such
unpatented claims or sites, (4) 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, (5) 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, (6) 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 (7) convert any unpatented
claims or mill sites into one or more leases or other forms of mineral tenure
pursuant to any Law hereafter enacted.

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

9.2.14  The Manager shall keep and maintain all required records, make
elections, and prepare and file all federal and state tax returns or other
required tax forms, and perform the other duties described in Exhibit C.

9.2.15  The Manager shall maintain Equity Accounts for each Member. Each
Member=s Equity Account shall be credited with the value of such Member’s
contributions under Sections 3.1.1 and 3.1.2 and shall be credited with any
additional amounts contributed by such Member to the Company. Each Member’s
Equity Account shall be charged with the cash and the fair market value of
property distributed to such Member (net of liabilities assumed by such Member
and liabilities to which such distributed property is subject). Contributions
and distributions shall include all cash contributions or distributions plus the
agreed value (expressed in dollars) of all in-kind contributions or
distributions. Solely for purposes of determining the Equity Account balances of
the Members, the Manager shall reasonably estimate the fair market value of all
Products distributed to the Members, and such estimated value shall be used
regardless of the actual amount received by each Member upon disposition of such
Products.
 
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9.2.16  Subject to Section 3.1.3, the Manager shall keep the Management
Committee advised of all Operations by submitting in writing to the members of
the Management Committee: (1) monthly progress reports that include statements
of expenditures and comparisons of such expenditures to the adopted Budget;
(2) periodic summaries of data acquired; (3) copies of reports concerning
Operations; (4) a detailed final report within thirty (30) days after completion
of each Program and Budget, which shall include comparisons between actual and
budgeted expenditures and comparisons between the objectives and results of
Programs; and (5) such other reports as any member of the Management Committee
may reasonably request. Subject to Section 13, at all reasonable times the
Manager shall provide the Management Committee, or other representative of a
Member upon the request of such Member’s member of the Management Committee,
access to, and the right to inspect and, at such Member’s cost and expense, copy
the Existing Data and all maps, drill logs and other drilling data, core, pulps,
reports, surveys, assays, analyses, production reports, operations, technical,
accounting and financial records, and other Business Information, 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.

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

9.2.18  The Manager shall undertake to perform Continuing Obligations when and
as economic and appropriate, whether before or after termination 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 related
accounts.

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9.2.19  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, and/or in longer term investments if
approved by the Management Committee. Such funds shall be used solely for
Environmental Compliance and Continuing Obligations, including the committing of
such funds, interests in property, insurance or bond policies, or other security
to satisfy Laws regarding financial assurance for the reclamation or restoration
of the Properties, and for other Environmental Compliance requirements.

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

9.2.21  The Manager shall undertake all other activities reasonably necessary to
fulfill the foregoing, and to implement the policies, objectives, procedures,
methods and actions determined by the Management Committee pursuant to Section
8.1.

9.3  Standard of Care. The Manager shall discharge its duties under Section 9.2
and conduct all Operations in a good, workmanlike and efficient manner, in
accordance with sound mining and other applicable industry standards and
practices, and in accordance with Laws and with the terms and provisions of
leases, licenses, permits, contracts and other agreements pertaining to the
Assets. The Manager shall not be liable to the other Member for any act or
omission resulting in damage or loss except to the extent caused by or
attributable to the Manager’s willful misconduct or gross negligence. The
Manager shall not be in default of any of its duties under Section 9.2 if its
inability or failure to perform results from the failure of the other Member to
perform acts or to contribute amounts required of it by this Agreement.

9.4  Resignation; Deemed Offer to Resign. The Manager may resign upon not less
than two (2) months prior notice to the other Member, in which case the other
Member may elect to become the new Manager by notice to the resigning Member
within ten (10) days after the notice of resignation. Subject to the provisions
of Section 9.1, if any of the following shall occur, the Manager shall be deemed
to have resigned upon the occurrence of the event described in each of the
following Sections, with the successor Manager to be appointed by the other
Member at a subsequently called meeting of the Management Committee, at which
the Manager shall not be entitled to vote. The other Member, or if there are
more than two (2) Members, the Member having the greatest aggregate Ownership
Interest, may appoint itself or a third party as the Manager.

9.4.1  The aggregate Ownership Interest of the Manager and its Affiliates
becomes less than fifty (50%), or, if there are more than two (2) Members, the
aggregate Ownership Interest of the Manager and its Affiliates becomes less than
the aggregate Ownership Interest of any other Member and its Affiliates;
 
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9.4.2  The Manager fails to perform a material obligation imposed upon it under
this Agreement and such failure continues for a period of sixty (60) days after
notice from the other Member demanding performance;

9.4.3  The Manager fails to pay or contest in good faith Company bills and
Company debts as such obligations become due;

9.4.4  A receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for a substantial part of its assets is appointed and such
appointment is neither made ineffective nor discharged within sixty (60) days
after the making thereof, or such appointment is consented to, requested by, or
acquiesced to by the Manager;

9.4.5  The Manager commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or consents to the entry
of an order for relief in an involuntary case under any such law or to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any substantial
part of its assets; or makes a general assignment for the benefit of creditors;
or takes corporate or other action in furtherance of any of the foregoing; or

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

Under Sections 9.4.4, 9.4.5 or 9.4.6 above, the appointment of a successor
Manager shall be deemed to pre-date the event causing a deemed resignation.

9.5  Payments To Manager. The Manager shall be compensated for its services and
reimbursed for its costs hereunder in accordance with Exhibit B.

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

9.7  Activities During Deadlock. If the Management Committee for any reason
fails to adopt an Exploration, Pre-Feasibility Study, Feasibility Study or
Development Program and Budget, the Manager shall continue Operations at levels
sufficient to maintain the Properties. If the Management Committee for any
reason fails to adopt an initial Mining Program and Budget or any Expansion or
Modification Programs and Budgets, the Manager shall continue Operations at
levels sufficient to maintain the then current Operations and Properties. If the
Management Committee for any reason fails to adopt Mining Programs and Budgets
subsequent to the initial Mining Program and Budget, subject to the contrary
direction of the Management Committee and receipt of necessary funds, the
Manager shall continue Operations at levels comparable with the last adopted
Mining Program and Budget. All of the foregoing shall be subject to the contrary
direction of the Management Committee and the receipt of necessary funds.

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10.  Programs And Budgets.

10.1  Initial Program and Budget. The Initial Program and Budget to which both
Members have agreed is adopted and is attached as Exhibit G.

10.2  Operations Pursuant to Programs and Budgets. Except as otherwise provided
in Section 3.1.3 and Section 10.12, Operations shall be conducted, expenses
shall be incurred, and Assets shall be acquired only pursuant to adopted
Programs and Budgets. Every Program and Budget adopted pursuant to this
Agreement shall provide for expenditures of Qualifying Expenses in an amount
sufficient for Coolcharm to satisfy its Initial Contribution obligations and for
accrual of reasonably anticipated Environmental Compliance expenses for all
Operations contemplated under the Program and Budget.

10.3  Presentation of Programs and Budgets. Proposed Programs and Budgets shall
be prepared by the Manager for a period of one (1) year or any other period as
approved by the Management Committee, and shall be submitted to the Management
Committee for review and consideration. All proposed Programs and Budgets may
include Exploration, Pre-Feasibility Studies, Feasibility Study, Development,
Mining and Expansion or Modification Operations components, or any combination
thereof, and shall be reviewed and adopted upon a vote of the Management
Committee in accordance with Sections 8.2 and 10.4. Each Program and Budget
adopted by the Management Committee, regardless of length, shall be reviewed at
least once a year at a meeting of the Management Committee. During the period
encompassed by any Program and Budget, and at least two (2) months prior to its
expiration, a proposed Program and Budget for the succeeding period shall be
prepared by the Manager and submitted to the Management Committee for review and
consideration.

10.4  Review and Adoption of Proposed Programs and Budgets. Within thirty (30)
days after submission of a proposed Program and Budget, each Member shall submit
in writing to the Management Committee:

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

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

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

If a Member fails to give any of the foregoing responses within the allotted
time, the failure shall be deemed to be a vote by the Member for adoption of the
Manager’s proposed Program and Budget. If a Member makes a timely submission to
the Management Committee pursuant to Sections 10.4.1, 10.4.2, or 10.4.3, then
the Manager working with the other Member shall seek for a period of time not to
exceed twenty (20) days to develop a complete Program and Budget acceptable to
both Members. The Manager shall then call a Management Committee meeting in
accordance with Section 8.3 for purposes of reviewing and voting upon the
proposed Program and Budget.
 
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10.5  Election to Participate.

10.5.1  By notice to the Management Committee within twenty (20) calendar days
after the final vote adopting a Program and Budget, and notwithstanding its vote
concerning adoption of a Program and Budget, a Member may elect to participate
in the approved Program and Budget: (1) in proportion to its respective
Ownership Interest, (2) in some lesser amount than its respective Ownership
Interest, or (3) not at all. In case of an election under Section 10.5.1(2) or
10.5.1(3), its Ownership Interest shall be recalculated as provided in
Section 10.5.2 below, with dilution effective as of the first day of the Program
Period for the adopted Program and Budget. If a Member fails to so notify the
Management Committee of the extent to which it elects to participate, the Member
shall be deemed to have elected to contribute to such Program and Budget in
proportion to its respective Ownership Interest as of the beginning of the
Program Period.

10.5.2  If a Member elects to contribute to an adopted Program and Budget some
lesser amount than in proportion to its respective Ownership Interest, or not at
all, and the other Member elects to fund all or any portion of the deficiency,
the Ownership Interest of the Reduced Member shall be provisionally recalculated
as follows:

10.5.2.1  For an election made before Payout, by dividing: (1) the sum of
(a) the amount credited to the Reduced Member’s Equity Account with respect to
its Initial Contribution under Section 3.1, (b) the total of all of the Reduced
Member’s contributions to the Company under Section 10.5.1 or otherwise pursuant
to this Agreement, and (c) the amount, if any, the Reduced Member elects to
contribute to the adopted current Program and Budget; by (2) the sum of (a), (b)
and (c) above for both Members; and then multiplying the result by one hundred;
or

10.5.2.2  For an election made after Payout, by reducing its Ownership Interest
in an amount equal to two (2) times the amount by which it would have been
reduced under Section 10.5.2.1 if such election were made before Payout.

The Ownership Interest of the other Member shall be increased by the amount of
the reduction in the Ownership Interest of the Reduced Member, and if the other
Member elects not to fund the entire deficiency, the Manager shall adjust the
Program and Budget to reflect the funds available.

10.5.3  Whenever the Ownership Interests are recalculated pursuant to this
Section, (1) the Equity Accounts of both Members shall be revised to bear the
same ratio to each other as their recalculated Ownership Interests; (2) the
Schedule of Members shall be amended to reflect the recalculated Ownership
Interests; and (3) the portion of Capital Account attributable to the reduced
Ownership Interest of the Reduced Member shall be transferred to the other
Member.
 
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10.6  Recalculation or Restoration of Reduced Interest Based on Actual
Expenditures.

10.6.1  If a Member makes an election under Section 10.5.1(2) or 10.5.1(3), then
within thirty (30) days after the conclusion of such Program and Budget, the
Manager shall report the total amount of money expended plus the total
obligations incurred by the Manager for such Budget.

10.6.2  If the Manager expended or incurred obligations that were more or less
than the adopted Budget, the Ownership Interests shall be recalculated pursuant
to Section 10.5.2 by substituting each Member’s actual contribution to the
adopted Budget for that Member’s estimated contribution at the time of the
Reduced Member’s election under Section 10.5.1.

10.6.3  If the Manager expended or incurred obligations of less than eighty
percent (80%) of the adopted Budget, within thirty (30) days of receiving the
Manager’s report on expenditures, the Reduced Member may notify the other Member
of its election to reimburse the other Member for the difference between any
amount contributed by the Reduced Member to such adopted Program and Budget and
the Reduced Member’s proportionate share (at the Reduced Member’s former
Ownership Interest) of the actual amount expended or incurred for the Program,
plus interest on the difference accruing at the rate described in Section 11.3
plus two (2) percentage points. The Reduced Member shall deliver the appropriate
amount (including interest) to the other Member with such notice. Failure of the
Reduced Member to so notify and tender such amount shall result in dilution
occurring in accordance with this Section 10 and shall bar the Reduced Member
from its rights under this Section 10.6.3 concerning the relevant adopted
Program and Budget.

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

10.6.5  Whenever the Ownership Interests are recalculated pursuant to this
Section, (1) the Members Equity Accounts shall be revised to bear the same ratio
to each other as their Recalculated Ownership Interests; (2) the Schedule of
Members shall be amended to reflect the recalculated Ownership Interests; and
(3) the Capital Accounts of the Members shall be determined without regard to
Section 10.5.3, provided, that the portion of Capital Account attributable to
the reduced Ownership Interest of the Reduced Member, if any, after taking into
account the adjustments required by this Section 10.6 shall be transferred to
the other Member.

10.7  Pre-Feasibility Study Program and Budgets.

10.7.1  At such time as either Member is of the good faith and reasonable
opinion that economically viable Mining Operations may be possible on the
Properties, the Member may propose to the Management Committee that a
Pre-Feasibility Study Program and Budget, or a Program and Budget that includes
Pre-Feasibility Studies, be prepared. Such proposal shall be made in writing to
the other Member, shall reference the data upon which the proposing Member bases
its opinion, and shall call a meeting of the Management Committee pursuant to
Section 8.3. If such proposal is adopted by the Management Committee, the
Manager shall prepare or have prepared a Pre-Feasibility Study Program and
Budget as approved by the Management Committee and shall submit the same to the
Management Committee within thirty (30) days following adoption of the proposal.

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10.7.2  Pre-Feasibility Studies may be conducted by the Manager, Feasibility
Contractors, or both, or may be conducted by the Manager and audited by
Feasibility Contractors, as the Management Committee determines. A
Pre-Feasibility Study Program shall include the work necessary to prepare and
complete the Pre-Feasibility Study approved in the proposal adopted by the
Management Committee, which may include some or all of the following:

10.7.2.1  Analyses of various alternatives for mining, processing and
beneficiation of Products;

10.7.2.2  Analyses of alternative mining, milling, and production rates;

10.7.2.3  Analyses of alternative sites for placement of facilities (i.e., water
supply facilities, transport facilities, reagent storage, offices, shops,
warehouses, stock yards, explosives storage, handling facilities, housing,
public facilities);

10.7.2.4  Analyses of alternatives for waste treatment and handling (including a
description of each alternative of the method of tailings disposal and the
location of the proposed disposal site);

10.7.2.5  Estimates of recoverable proven and probable reserves of Products and
of related substances, in terms of technical and economic constraints
(extraction and treatment of Products), including the effect of grade, losses,
and impurities, and the estimated mineral composition and content thereof, and
review of mining rates commensurate with such reserves;

10.7.2.6  Analyses of environmental impacts of the various alternatives,
including an analysis of the permitting, environmental liability and other
Environmental Law implications of each alternative, and costs of Environmental
Compliance for each alternative;

10.7.2.7  Conduct of appropriate metallurgical tests to determine the efficiency
of alternative extraction, recovery and processing techniques, including an
estimate of water, power, and reagent consumption requirements;

10.7.2.8  Conduct of hydrology and other studies related to any required
dewatering; and

10.7.2.9  Conduct of other studies and analyses approved by the Management
Committee.
 
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10.7.3  The Manager shall have the discretion to base its and any Feasibility
Contractors’ Pre-Feasibility Study on the cumulative results of each discipline
studied, so that if a particular portion of the work would result in the
conclusion that further work based on these results would be unwarranted for a
particular alternative, the Manager shall have no obligation to continue
expenditures on other Pre-Feasibility Studies related solely to such
alternative.

10.8  Completion of Pre-Feasibility Studies and Selection of Approved
Alternatives. As soon as reasonably practical following completion of all
Pre-Feasibility Studies required to evaluate fully the alternatives studied
pursuant to Pre-Feasibility Programs, the Manager shall prepare a report
summarizing all Pre-Feasibility Studies and shall submit the same to the
Management Committee. Such report shall incorporate the following:

10.8.1  The results of the analyses of the alternatives and other matters
evaluated in the conduct of the Pre-Feasibility Programs;

10.8.2  Reasonable estimates of capital costs for the Development and start-up
of the mine, mill and other processing and ancillary facilities required by the
Development and Mining alternatives evaluated (based on flow sheets, piping and
instrumentation diagrams, and other major engineering diagrams), which cost
estimates shall include reasonable estimates of:

10.8.2.1  Capitalized pre-stripping expenditures, if an open pit or surface mine
is proposed;
 
10.8.2.2  Expenditures required to purchase, construct and install all
machinery, equipment and other facilities and infrastructure (including
contingencies) required to bring a mine into commercial production, including an
analysis of costs of equipment or supply contracts in lieu of Development costs
for each Development and Mining alternative evaluated;

10.8.2.3  Expenditures required to perform all other related work required to
commence commercial production of Products and, if applicable, process Products
(including reasonable estimates of working capital requirements); and

10.8.2.4  All other direct and indirect costs and general and administrative
expenses that may be required for a proper evaluation of the Development and
Mining alternatives and annual production levels evaluated. The capital cost
estimates shall include a schedule of the timing of the estimated capital
requirements for each alternative;

10.8.3  A reasonable estimate of the annual expenditures required for the first
year of Operations after completion of the capital program described in
Section 10.8.2 for each Development alternative evaluated, and for subsequent
years of Operations, including estimates of annual production, processing,
administrative, operating and maintenance expenditures, taxes (other than income
taxes), working capital requirements, royalty and purchase obligations,
equipment leasing or supply contract expenditures, work commitments,
Environmental Compliance costs, post-Operations Environmental Compliance and
Continuing Obligations funding requirements and all other anticipated costs of
such Operations. This analysis shall also include an estimate of the number of
employees required to conduct such Operations for each alternative;
 
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10.8.4  A review of the nature, extent and rated capacity of the mine,
machinery, equipment and other facilities preliminarily estimated to be required
for the purpose of producing and marketing Products under each Development and
Mining alternative analyzed;

10.8.5  An analysis (and sensitivity analyses reasonably requested by either
Member), based on various target rates of return and price assumptions requested
by either Member, of whether it is technically, environmentally, and
economically feasible to place a prospective ore body or deposit within the
Properties into commercial production for each of the Development and Mining
alternatives analyzed (including a discounted cash flow rate of return
investment analysis for each alternative and net present value estimate using
various discount rates requested by either Member); and

10.8.6  Such other information as the Management Committee deems appropriate.

Within thirty (30) days after delivery of the Pre-Feasibility Study summary to
the Members, a Management Committee meeting shall be convened for the purposes
of reviewing the Pre-Feasibility Study summary and selecting one or more
Approved Alternatives, if any.
 
10.9  Programs and Budgets for Feasibility Study. Within thirty (30) days
following the selection of an Approved Alternative, the Manager shall submit to
the Management Committee a Program and a Budget, which shall include necessary
Operations, for the preparation of a Feasibility Study. A Feasibility Study may
be prepared by the Manager, Feasibility Contractors, or both, or may be prepared
by the Manager and audited by Feasibility Contractors, as the Management
Committee determines.

10.10  Development Programs and Budgets; Project Financing.

10.10.1  Unless otherwise determined by the Management Committee, the Manager
shall not submit to the Management Committee a Program and Budget including
Development of the mine described in a completed Feasibility Study until thirty
(30) days following the receipt by Manager of the Feasibility Study. The Program
and Budget, which includes Development of the mine described in the completed
Feasibility Study, shall be based on the estimated cost of Development described
in the Feasibility Study for the Approved Alternative, unless otherwise directed
by the Management Committee.

10.10.2  Promptly following adoption of the Program and Budget, which includes
Development as described in a completed Feasibility Study, but in no event more
than sixty (60) days thereafter, the Manager shall submit to the Management
Committee a report on material bids received for Development work (“Bid
Report”). If bids described in the Bid Report result in the aggregate cost of
Development work exceeding twenty percent (20%) of the Development cost
estimates that formed the basis of the Development component of the adopted
Program and Budget, the Program and Budget, which includes relevant Development,
shall be deemed to have been re-submitted to the Management Committee based on
the aggregate costs as described in the Bid Report on the date of receipt of the
Bid Report and shall be reviewed and adopted in accordance with Sections 8.2 and
10.4.

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10.10.3  If the Management Committee approves the Development of the mine
described in a Feasibility Study and also decides to seek Project Financing for
such mine, each Member shall, at its own cost, cooperate in seeking to obtain
Project Financing for such mine; provided, however, that all fees, charges and
costs (including attorneys and technical consultants fees) paid to the Project
Financing lenders shall be borne by the Members in proportion to their Ownership
Interests, unless such fees are capitalized as a part of the Project Financing.

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

10.12  Budget Overruns; Program Changes. For Programs and Budgets adopted after
completion of Coolcharm’s Initial Contribution, the Manager shall immediately
notify the Management Committee of any material departure from an adopted
Program and Budget. If the Manager exceeds an adopted Budget by more than ten
percent (10%) in the aggregate, then the excess over ten percent (10%), unless
authorized or ratified by the Management Committee, shall be for the sole
account of the Manager and such excess shall not be included in the calculations
of the Ownership Interests nor deemed a contribution under this Agreement.
Budget overruns of ten percent (10%) or less in the aggregate shall be borne by
the Members in proportion to their respec-tive Ownership Interests.

10.13  Supplemental Business Arrangement. At any time during the term of this
Agreement, the Management Committee may determine by unanimous vote of both
Members after Coolcharm’s Initial Contribution obligations have been fully
satisfied that it is appropriate to segregate the Area of Interest into areas
subject to separate Programs and Budgets for purposes of conducting further
Exploration, Pre-Feasibility or Feasibility Studies, Development, or Mining. At
such time, the Management Committee shall designate which portion of the
Properties will comprise an area of interest under a separate business
arrangement (“Supplemental Business Arrangement”) for the purpose of further
exploring, analyzing, developing, and mining such portion of the Properties. The
Supplemental Business Arrangement shall substantially reflect the same terms as
this Agreement, with rights and interests of the Members in the Supplemental
Business Arrangement identical to the rights and interests of the Members in the
Company at the time of the designation, unless otherwise agreed to by the
Members, and with the Members agreeing to new Capital and Equity Accounts and
other terms necessary for the Supplemental Business Arrangement to comply with
the nature and purpose of the designation. Following the effectuation of the
Supplemental Business Arrangement, this Agreement shall terminate insofar as it
affects the Properties covered by the Supplemental Business Arrangement.

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11.  Accounts and Settlements.

11.1  Monthly Statements. After completion of Coolcharm’s Initial Contribution,
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.

11.2  Cash Calls. On the basis of each adopted Program and Budget, the Manager
shall submit prior to the last day of each month a billing for estimated cash
requirements for the next month. Within ten (10) days after receipt of each
billing, each Member shall advance its proportionate share of such cash
requirements. The Manager shall record all funds received in the Business
Account. The Manager shall at all times maintain a cash balance approximately
equal to the rate of disbursement for up to thirty (30) days. All funds in
excess of immediate cash requirements shall be invested by the Manager for the
benefit of the Company 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.
 
11.3  Failure to Meet Cash Calls. A Member that fails to meet cash calls in the
amount and at the times specified in Section 11.2 shall be in default, and the
amounts of the defaulted cash call shall bear interest from the date due at an
annual rate equal to two (2) percentage points over the Prime Rate, but in no
event shall the rate of interest exceed the maximum permitted by Law. Such
interest shall accrue to the benefit of and be payable to the non-defaulting
Member, but shall not be deemed as amounts contributed by the defaulting Member
in the event dilution occurs in accordance with Section 4.2.3. In addition to
any other rights and remedies available to it by Law, the non-defaulting Member
shall have those other rights, remedies, and elections specified in Sections
11.4 and 11.5.

11.4  Cover Payment. If a Member defaults in making a contribution or cash call
required by an adopted Program and Budget, the non-defaulting Member may, but
shall not be obligated to, advance some portion or all of the amount in default
on behalf of the defaulting Member (a “Cover Payment”). Each and every Cover
Payment shall constitute a demand loan bearing interest from the date of the
advance at the rate provided in Section 11.3. If more than one Cover Payment is
made, the Cover Payments shall be aggregated and the rights and remedies
pertaining to an individual Cover Payment shall apply to the aggregated Cover
Payments. The failure to repay such loan upon demand shall be a default.

11.5  Remedies. The Members acknowledge that if either Member defaults in making
a contribution required by Section 3 or a cash call, or in repaying a loan, as
required under Sections 11.2, 11.3 or 11.4, whether or not a Cover Payment is
made, it will be difficult to measure the damages resulting from such default
(it being understood and agreed that the Members have attempted to determine
such damages in advance and determined that the calculation of such damages
cannot be ascertained with reasonable certainty). Both Members acknowledge and
recognize that the damage to the non-defaulting Member could be significant. In
the event of such default, as reasonable liquidated damages, the non-defaulting
Member may, with respect to any such default not cured within thirty (30) days
after notice to the defaulting Member of such default, elect any of the
following remedies by giving notice to the defaulting Member. Such election may
be made with respect to each failure to meet a cash call relating to a Program
and Budget, regardless of the frequency of such cash calls, provided such cash
calls are made in accordance with Section 11.2.
 
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11.5.1  The defaulting Member grants to the non-defaulting Member a power of
sale as to all or any portion of its Ownership Interest or of its interest in
any Assets, upon a default under Sections 11.3 or 11.4. Such power shall be
exercised in the manner provided by applicable Law or otherwise in a
commercially reasonable manner and upon reasonable notice. If the non-defaulting
Member elects to enforce the lien or security interest pursuant to the terms of
this Section, the defaulting Member shall be deemed to have waived any available
right of redemption, any required valuation or appraisal of the secured property
prior to sale, any available right to stay execution or to require a marshaling
of assets, and any required bond in the event a receiver is appointed, and the
defaulting Member shall be liable for any deficiency.

11.5.2  The non-defaulting Member may elect to have the defaulting Member’s
Ownership Interest diluted or eliminated as follows:
 
11.5.2.1  For a default occurring before Payout relating to a Program and Budget
covering in whole or in part Exploration, Pre-Feasibility Study or Feasibility
Study Operations, the Reduced Member’s Ownership Interest shall be recalculated
by dividing: (X) the sum of (1) the value of the Reduced Member’s Initial
Contribution under Section 3.1, (2) the total of all of the Reduced Member’s
contributions to the Company under Section 10.5.1 or otherwise pursuant to this
Agreement and (3) the amount, if any, the Reduced Member contributed to the
adopted current Program and Budget with respect to which the default occurred;
by (Y) the sum of (1), (2) and (3) above for both Members; and then multiplying
the result by one hundred. For such a default occurring after Payout, the
Reduced Member’s Ownership Interest shall be reduced in an amount equal to two
(2) times the amount by which it would have been reduced if such default had
occurred before Payout. For such a default, whether occurring before or after
Payout, the Recalculated Ownership Interest shall then be further reduced:

11.5.2.1.1 For a default relating exclusively to an Exploration Program and
Budget, by multiplying the Recalculated Ownership Interest by the following
percentage: 90%; or

11.5.2.1.2 For a default relating to a Program and Budget covering in whole or
in part Pre-Feasibility Study and/or Feasibility Study Operations, by
multiplying Recalculated Ownership Interest by the following percentage: 80%.

The Ownership Interest of the other Member shall be increased by the amount of
the reduction in the Ownership Interest of the Reduced Member, including the
further reduction under Sections 10.5.2.1.1 or 10.5.2.1.1.

11.5.2.2  For a default relating to a Program and Budget covering in whole or in
part Development or Mining, at the non-defaulting Member’s election, the
defaulting Member shall be deemed to have withdrawn and to have automatically
relinquished its interest in the Assets to the non-defaulting Member; provided,
however, the defaulting Member shall have the right to receive only from five
percent (5%) of Net Proceeds, if any, and not from any other source, an amount
equal to 50 percent (50%) of the defaulting Member’s Equity Account balance at
the time of such default. Upon receipt of such amount the defaulting Member
shall thereafter have no further right, title or interest in the Assets.

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11.5.2.3  Dilution under this Section 11.5.2 shall be effective as of the date
of the original default, and Section 10.6 shall not apply. The amount of any
Cover Payment under Section 11.4 and interest, or any interest accrued in
accordance with Section 11.3, shall be deemed to be amounts contributed by the
non-defaulting Member, and not as amounts contributed by the defaulting Member.

11.5.2.4  Whenever the Ownership Interests are recalculated pursuant to this
Section 11.5.2, (1) the Equity Accounts of both Members shall be adjusted to
bear the same ratio to each other as their recalculated Ownership Interests; and
(2) the portion of Capital Account attributable to the reduced Ownership
Interest of the Reduced Member shall be transferred to the other Member.

11.5.3  If a Member has defaulted in meeting a cash call or repaying a loan, and
if the non-defaulting Member has made a Cover Payment, then, in addition to a
reduction in the defaulting Member’s Ownership Interest effected pursuant to
Section 11.5.2, the non-defaulting Member shall have the right, if the
indebtedness arising from a default or Cover Payment is not discharged within
fifteen (15) days of the default and upon not less than thirty (30) days advance
notice to the defaulting Member, to elect to purchase all the right, title, and
interest, whenever acquired or arising, of the defaulting Member in the Company
and Assets, including but not limited to its Ownership Interest or interest in
Net Proceeds, together with all proceeds from and accessions of the foregoing
(collectively the “Defaulting Member’s Entire Interest”) at a purchase price
equal to 50 percent (50%) of the fair market value thereof as determined by a
qualified independent appraiser appointed by the non-defaulting Member. If the
defaulting Member conveys notice of objection to the person so appointed within
ten (10) days after receiving notice thereof, then an independent and qualified
appraiser shall be appointed by the joint action of the appraiser appointed by
the non-defaulting Member and a qualified independent appraiser appointed by the
defaulting Member; provided, however, that if the defaulting Member fails to
designate a qualified independent appraiser for such purpose within ten (10)
days after giving notice of such objection, then the person originally
designated by the non-defaulting Member shall serve as the appraiser; provided
further, that if the appraisers appointed by each of the Members fail to appoint
a third qualified independent appraiser within five (5) days after the
appointment of the last of them, then an appraiser shall be appointed by a judge
of a court of competent jurisdiction in the state in which the Assets are
situated upon the application of either Member. There shall be withheld from the
purchase price payable, upon transfer of the Defaulting Member’s Entire
Interest, the amount of any Cover Payment under Section 11.4 and unpaid interest
thereon to the date of such transfer, or any unpaid interest accrued in
accordance with Section 11.3 to the date of such transfer. Upon payment of such
purchase price, the defaulting Member shall be deemed to have relinquished all
of the Defaulting Member’s Entire Interest to the non-defaulting Member.

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11.6  Audits.

11.6.1  After completion of Coolcharm’s Initial Contribution, within sixty (60)
days after the end of each calendar year, at the request of a Member, an audit
shall be completed by certified public accountants selected by, and independent
of, the Manager. The audit shall be conducted in accordance with generally
accepted auditing standards and shall cover all books and records maintained by
the Manager pursuant to this Agreement, all Assets and Encumbrances, and all
transactions and Operations conducted during such calendar year, including
production and inventory records and all costs for which the Manager sought
reimbursement under this Agreement, together with all other matters customarily
included in such audits. All written exceptions to and claims upon the Manager
for discrepancies disclosed by such audit shall be made not more than three (3)
months after receipt of the audit report, unless either Member elects to conduct
an independent audit pursuant to Section 11.6.2 which is ongoing at the end of
such three (3) month period, in which case such exceptions and claims may be
made within the period provided in Section 11.6.2. Failure to make any such
exception or claim within such period shall mean the audit is deemed to be
correct and binding upon the Members. The cost of all audits under this Section
shall be charged to the Business Account.

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

12.  Properties.

12.1  Royalties, Production Taxes and Other Payments Based on Production. All
required payments of production royalties, taxes based on production of
Products, and other payments out of production to private parties and
governmental entities, shall be determined and made by the Company in a timely
manner and otherwise in accordance with applicable laws and agreements. The
Manager shall furnish to the Members evidence of timely payment for all such
required payments. In the event the Company fails to make any such required
payment, any Member shall have the right to make such payment and shall thereby
become subrogated to the rights of such third party; provided, however, that the
making of any such payment on behalf of the Company shall not constitute
acceptance by the paying Member of any liability to such third party for the
underlying obligation.
 
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12.2  Abandonment and Surrender. Either Member may request the Management
Committee to authorize the Manager to surrender or abandon part or all of the
Properties. At the option of the other Member, the Company shall assign to the
objecting Member or such other Person as the objecting Member specifies, by
special warranty deed and without cost to the objecting Member, all of the
Company’s interest in the Properties sought to be abandoned or surrendered, free
and clear of all Encumbrances created by, through or under the Company other
than those to which both Members have agreed. Upon the assignment, such
properties shall cease to be part of the Properties.

13.  Confidentiality, Ownership, Use and Disclosure of Information.

13.1  Business Information. All Business Information shall be owned jointly by
the Members as their Ownership Interests are determined pursuant to this
Agreement. Both before and after the termination of the Company, all Business
Information may be used by either Member for any purpose, whether or not
competitive with the Business, without consulting with, or obligation to, the
other Member. Except as provided in Sections 13.3 and 13.4, or with the prior
written consent of the other Member, each Member shall keep confidential and not
disclose to any third party or the public any portion of the Business
Information that constitutes Confidential Information.
 
13.2  Member Information. In performing its obligations under this Agreement,
neither Member shall be obligated to disclose any Member Information. If a
Member elects to disclose Member Information in performing its obligations under
this Agreement, such Member Information, together with all improvements,
enhancements, refinements and incremental additions to such Member Information
that are developed, conceived, originated or obtained by either Member in
performing its obligation under this Agreement (“Enhancements”), shall be owned
exclusively by the Member that originally developed, conceived, originated or
obtained such Member Information. Each Member may use and enjoy the benefits of
such Member Information and Enhancements in the conduct of the Business
hereunder, but the Member that did not originally develop, conceive, originate
or obtain such Member Information may not use such Member Information and
Enhancements for any other purpose. Except as provided in Section 13.4, or with
the prior written consent of the other Member, which consent may be withheld in
such Member’s sole discretion, each Member shall keep confidential and not
disclose to any third party or the public any portion of Member Information and
Enhancements owned by the other Member that constitutes Confidential
Information.

13.3  Permitted Disclosure of Confidential Business Information. Either Member
may disclose Business Information that is Confidential Information: (1) to a
Member’s officers, directors, partners, members, employees, Affiliates,
shareholders, agents, attorneys, accountants, consultants, contractors,
subcontractors or advisors, for the sole purpose of such Member’s performance of
its obligations under this Agreement; (2) to any party to whom the disclosing
Member contemplates a Transfer of all or any part of its Ownership Interest, for
the sole purpose of evaluating the proposed Transfer; (3) 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 (4) to a
third party with whom the disclosing Member contemplates any independent
business activity or operation.
 
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The Member disclosing Confidential Information pursuant to this Section 13.3,
shall disclose such Confidential Information to only those parties that have a
bona fide need to have access to such Confidential Information for the purpose
for which disclosure to such parties is permitted under this Section 13.3 and
that have agreed in writing supplied to, and enforceable by, the other Member to
protect the Confidential Information from further disclosure, to use such
Confidential Information solely for such purpose and to otherwise be bound by
the provisions of this Section 13. Such writing shall not preclude parties
described in Section 13.3.2 from discussing and completing a Transfer with the
other Member. The Member disclosing Confidential Information shall be
responsible and liable for any use or disclosure of the Confidential Information
by such parties in violation of this Agreement and such other writing.

13.4  Disclosure Required By Law. Notwithstanding anything contained in this
Section, a Member may disclose any Confidential Information if, in the opinion
of the disclosing Member’s legal counsel: (1) such disclosure is legally
required to be made in a judicial, administrative or governmental proceeding
pursuant to a valid subpoena or other applicable order; or (2) such disclosure
is legally required to be made pursuant to the rules or regulations of a stock
exchange or similar trading market applicable to the disclosing Member.

Prior to any disclosure of Confidential Information under this Section 13.4, the
disclosing Member shall give the other Member at least ten (10) days prior
written notice (unless less time is permitted by such rules, regulations or
proceeding) and, in making such disclosure, the disclosing Member shall disclose
only that portion of Confidential Information required to be disclosed and shall
take all reasonable efforts to preserve the confidentiality thereof, including,
without limitation, obtaining protective orders and supporting the other Member
in intervention in any such proceeding.
 
13.5  Public Announcements. Prior to making or issuing any press release or
other public announcement or disclosure of Business Information that is not
Confidential Information, a 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. Any press release or other public
announcement or disclosure to be issued by either Member relating to this
Business shall also identify the other Member.

14.  Resignation and Dissolution.

14.1  Events of Dissolution. The Company shall be dissolved upon the occurrence
of any of the following:

14.1.1  Upon expiration of term of this Agreement in accordance with
Section 2.5;

14.1.2  Upon the unanimous written agreement of the Members;

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14.1.3  At the election of either Member upon sixty (60) days notice of
termination to the other Member, if the Management Committee fails to adopt a
Program and Budget for six (6) months after the expiration of the latest adopted
Program and Budget;

14.1.4  Upon the resignation of a Member pursuant to Section 14.2 or upon the
bankruptcy, insolvency, dissolution or assignment for the benefit of creditors
of a Member; or

14.1.5  As otherwise provided by the Act.

14.2  Resignation. A Member may elect to resign from the Company by (1) in the
case of Coolcharm, failing to complete its Initial Contributions as required by
Section 3.1.2, or (2) giving notice to the other Member of the effective date of
resignation, which shall be the later of the end of the then current Program
Period or thirty (30) days after the date of the notice. Upon resignation by a
Member, the resigning Member shall be deemed to have transferred to the
remaining Member all of its Ownership Interest, including all of its interest in
the Assets and its Capital Account, without cost and free and clear of all
Encumbrances arising by, through or under such resigning Member, except those
described in Section 1.1 of Exhibit A and those to which both Members have
agreed. The resigning Member shall execute and deliver all instruments as may be
necessary in the reasonable judgment of the other Member to effect the transfer
of its interests in the Company and the Assets to the other Member. A resigning
Member shall have no right to receive the fair value of his Ownership Interest
pursuant to the Act. If within a sixty (60) day period both Members elect to
withdraw, then the Company shall instead be deemed to have been terminated by
the written agreement of the Members pursuant to Section 14.1.2.
 
14.3  Disposition of Assets on Dissolution. Promptly after dissolution under
Section 14.1, the Manager shall take all action necessary to wind up the
activities of the Company, in accordance with Exhibit C. All costs and expenses
incurred in connection with the dissolution of the Company shall be expenses
chargeable to the Business Account.

14.4  Filing of Certificate of Cancellation. Upon completion of the winding up
of the affairs of the Company, the Manager shall promptly file a Certificate of
Cancellation with the Office of the Secretary of State of the State of Nevada.
If the Manager has caused the dissolution of the Company, whether voluntarily or
involuntarily, then a person selected by a majority vote of the Members to wind
up the affairs of the Company shall file the Certificate of Cancellation.

14.5  Right to Data After Dissolution. After dissolution of the Company pursuant
to Sections 14.1.1, 14.1.2, 14.1.3, or 14.1.5, each Member shall be entitled to
make copies of all applicable information acquired hereunder before the
effective date of termination not previously furnished to it, but a bankrupt or
resigning Member causing a dissolution of the Company pursuant to Section 14.1.4
shall not be entitled to any such copies.

14.6  Continuing Authority. On dissolution of the Company under Section 14.1, or
the deemed resignation of either Member pursuant to Sections 3.2 or 11.5, the
Member that was the Manager prior to such dissolution (or the other Member in
the event of a resignation by the Manager) shall have the power and authority to
do all things on behalf of both Members that are reasonably necessary or
convenient to: (1) wind up Operations and (2) complete any transaction and
satisfy any obligation, unfinished or unsatisfied, at the time of such
termination or resignation, if the transaction or obligation arises out of
Operations prior to such termination or resignation. The Manager shall have the
power and authority to grant or receive extensions of time or change the method
of payment of an already existing liability or obligation, prosecute and defend
actions on behalf of the Company and either or both Members, encumber Assets,
and take any other reasonable action in any matter with respect to which the
former Members continue to have, or appear or are alleged to have, a common
interest or a common liability.

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15.  Disputes.

15.1  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
Nevada, without regard for any conflict of laws or choice of laws principles
that would permit or require the application of the laws of any other
jurisdiction.

15.2  Forum Selection. Any action or proceeding concerning the construction,
enforcement or interpretation of the terms of this Agreement or any claim or
dispute between the parties shall be commenced and heard in the Second Judicial
District Court of the State of Nevada, in and for the County of Washoe, Reno,
Nevada. Each Member agrees and submits to the jurisdiction of and venue in the
Second Judicial District Court.

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15.3  Dispute Resolution. All disputes 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.

16.  General Provisions.

16.1  Notices. All notices, payments and other required or permitted
communications (ANotices@) to either Member shall be in writing, and shall be
addressed respectively as follows:
 
 
 

   If  to WGI:   Western Goldfields, Inc.         961 Matley Lane, Suite 120    
   Reno, Nevada 89502        tmancuso@westerngoldfields.com        Fax:
775-337-9441              If to Coolcharm:  Coolcharm Gold Mining Company Ltd.  
     133 Ebury Street        London SW 1W9QU        United Kingdom      
 gerard.thompson@ftnetwork.com        Fax: 011-44-20-7881-0707  

 
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All Notices shall be given (1) by personal delivery to the Member, (2) by
electronic communication, capable of producing a printed transmission, (3) by
registered or certified mail return receipt requested, or (4) by overnight or
other express courier service. All Notices shall be effective and shall be
deemed given on the date of receipt at the principal address if received during
normal business hours, and, if not received during normal business hours, on the
next business day following receipt, or if by electronic communication, on the
date of such communication. Either Member may change its address by Notice to
the other Member.

16.2  Gender. The singular shall include the plural, and the plural the singular
wherever the context so requires, and the masculine, the feminine, and the
neuter genders shall be mutually inclusive.

16.3  Currency. All references to “dollars” or “$” shall mean lawful currency of
the United States of America.

16.4  Headings. The subject headings of the Sections and Sections of this
Agreement and Exhibits to this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of its provisions.
 
16.5  Waiver. The failure of either Member to insist on the strict performance
of any provision of this Agreement or to exercise any right, power or remedy
upon a breach hereof shall not constitute a waiver of any provision of this
Agreement or limit such Member=s right thereafter to enforce any provision or
exercise any right.

16.6  Modification. No modification of this Agreement shall be valid unless made
in writing and duly executed by both Members.

16.7  Force Majeure. Except for the obligation to make payments when due
hereunder, the obligations of a Member 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 to grant); acts of God; Laws,
instructions or requests of any government or governmental entity; judgments or
orders of any court; inability to obtain on reasonably acceptable terms any
public or private license, permit or other authorization; curtailment or
suspension of activities to remedy or avoid an actual or alleged, present or
prospective violation of Environmental Laws; action or inaction by any federal,
state or local agency that delays or prevents the issuance or granting of any
approval or authorization required to conduct Operations beyond the reasonable
expectations of the Member seeking the approval or authorization (including,
without limitation, a failure to complete any review and analysis required by
the National Environ-mental Policy Act or any similar state law within six (6)
months of initiation of that process); acts of war or conditions arising out of
or attributable to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather condition; delay or failure by suppliers
or transporters of materials, parts, supplies, services or equipment or by
contractors= or subcontractors= shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; actions by
native rights groups, environmental groups, or other similar special interest
groups; or any other cause whether similar or dissimilar to the foregoing. The
affected Member shall promptly give notice to the other Member of the suspension
of performance, stating therein the nature of the suspension, the reasons
therefore, and the expected duration thereof. The affected Member shall resume
performance as soon as reasonably possible. During the period of suspension the
obligations of both Members to advance funds pursuant to Section 11.2 shall be
reduced to levels consistent with then current Operations.

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16.8  Rule Against Perpetuities. The Members do not intend that there shall be
any violation of the Rule Against Perpetuities, the Rule Against Unreasonable
Restraints on the Alienation of Property, or any similar rule. Accordingly, if
any right or option to acquire any interest in the Properties, in an Ownership
Interest, in the Assets, or in any real property exists under this Agreement,
such right or option must be exercised, if at all, so as to vest such interest
within time periods permitted by applicable rules. If, however, any such
violation should inadvertently occur, the Members agree that a court shall
reform that provision in such a way as to approximate most closely the intent of
the Members within the limits permissible under such rules.
 
16.9  Further Assurances. Each of the Members shall take, from time to time and
without additional consideration, such further actions and execute such
additional instruments as may be reasonably necessary or convenient to implement
and carry out the intent and purpose of this Agreement or as may be reasonably
required by lenders in connection with Project Financing.

16.10  Entire Agreement; Successors and Assigns. This Agreement contains the
entire understanding of the Members and supersedes all prior agreements and
understandings between the Members 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.

16.11  Counterparts. This Agreement may be executed in any number of
counterparts, and it shall not be necessary that the signatures of both Members
be contained on any counterpart. Each counterpart shall be deemed an original,
but all counterparts together shall constitute one and the same instrument.

The parties have executed this Agreement as of the Effective Date.
 

        Western Goldfields, Inc.  
   
   
    By     Title:                 Coolcharm Gold Mining Company, LTD    
 
 
  By     Title:        

 
   
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Exhibit A

Lincoln Hill LLC
Members’ Agreement

Assets and Area of InterestAssets and Area of Interest

1.1 Properties and Title Exceptions.

a. Patented Mining Claims.

Claim Name    Mineral Survey No.

Abe Lincoln    4601

b. Unpatented Mining Claims.
 

 
Claim Name
 
BLM NMC Nos.
   
ALH 10 - ALH 11
824678-824679
   
ALH 31
824699
   
ALH 33
824701
   
ALH 35
824703
   
ALH 37
824705
   
ALH 39
824707
   
ALH 47 - ALH 49
824715-824717
   
ALH 58 - ALH 59
824726-824727
   
ALH 71 - ALH 72
827947-827948
   
ALH 74
828295
   
King Tut
520443
   
King Tut #1 to King Tut #3
520444-520446
   
Kings Ransom
520341
   
Kings Ransom #1
520342
   
LHL #3 to LHL #9
804472-804477
   
WMC-1 to WMC-6
790663-790668
 

 
c.  Agreements.
 
Coolcharm agrees to assume all underlying Agreements on the Property.
Letter of Intent between Maher and Mountain Gold Exploration, Inc. dated
effective January 18, 1999.
 
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Exploration and Mining Lease Agreement between Mountain Gold Exploration
Inc. and Lane A. Griffin and Western Goldfields, Inc. dated effective December
23, 2002

1.2 Personal Property.

All engineering, geochemical, geological, geophysical, metallurgical and title
data, information and reports concerning the Properties.

1.3 Area of Interest.

All lands within one (1) mile beyond the exterior boundaries of the Properties
as of the Effective Date of the Agreement and more specifically described as
follow:

T28N R33E Sec. 1 S ½ , 2 SE ¼ , 11 E ½ , 12, 13, 14 E ½ , 23, NE ¼ , 24 N ½ ,

T28N R34E Sec. 5 SW ½ , 6 S ½, 7, 8 W ½ , 17 W ½ , 18, 19 N ½ , 20 NW ¼
 
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Exhibit B

Lincoln Hill LLC
Operating Agreement

Accounting Procedures

The financing and accounting procedures to be followed by the Manager and the
Members under the Agreement are stated below. All capitalized terms in these
Accounting Procedures shall have the definition attributed to them in the
Agreement, unless defined otherwise.

The purpose of these Accounting Procedures is to establish equitable methods for
determining charges and credits applicable to Operations. It is the intent of
the Members that no Member shall lose or profit by reason of the designation of
one of them to exercise the duties and responsibilities of the Manager. The
Members shall meet and in good faith endeavor to agree upon changes deemed
necessary to correct any unfairness or inequity. In the event of a conflict
between the provisions of these Accounting Procedures and those of the
Agreement, the provisions of the Agreement shall control.

A. General Provisions.

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

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

3. Statements and Billings. The Manager shall prepare statements and bill the
Members as provided in Section 11 of the Agreement. Payment of any such billings
by a Member, including the Manager, shall not prejudice such Member’s right to
protest or question the billing’s correctness thereof for a period not to exceed
twenty-four (24) months following the calendar year during which such billings
were received by such Member. All written exceptions to and claims upon the
Manager for incorrect charges, billings or statements shall be made upon the
Manager within such twenty-four (24) month period. The time period permitted for
adjustments shall not apply to adjustments resulting from periodic inventories
as provided in Sections E.1 and E.2.
 
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B. Charges to Business Account. Subject to the limitations stated below, the
Manager shall charge the Business Account with the following:

1. Property Acquisition Costs, Rentals, Royalties and Other Payments. All
property acquisition and holding costs, including Governmental Fees, filing
fees, license fees, costs of permits and assessment work, delay rentals,
production royalties, including any required advances, and all other payments
made by the Manager which are necessary to acquire or maintain title to the
Assets.

2. Labor and Employee Benefits.

a. Salaries and wages of the Manager’s employees directly engaged in Operations,
including salaries or wages of employees who are temporarily assigned to and
directly employed by same.

b. The Manager’s cost of holiday, vacation, sickness and disability benefits,
and other customary allowances applicable to the salaries and wages chargeable
under Section B.2a and Section B.12. Such costs may be charged on a “when and as
paid basis” or by “percentage assessment” on the amount of salaries and wages.
If percentage assessment is used, the rate shall be applied to wages or salaries
excluding overtime and bonuses. Such rate shall be based on the Manager’s cost
experience and it shall be periodically adjusted at least annually to ensure
that the total of such charges does not exceed the actual cost thereof to the
Manager.

c. The Manager’s actual cost of established plans for employees’ group life
insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus
(except production or incentive bonus plans under a union contract based on
actual rates of production, cost savings and other production factors, and
similar non-union bonus plans customary in the industry or necessary to attract
competent employees, which bonus payments shall be considered salaries and wages
under Section B.2.a or Section B.12 rather than employees’ benefit plans) and
other benefit plans of a like nature applicable to salaries and wages chargeable
under Sections 2.2.1 or Section 2.12, provided that the plans are limited to the
extent feasible to those customary in the industry.

d. Cost of assessments imposed by governmental authority that are applicable to
salaries and wages chargeable under Section B.2.a and Section B.12, including
all penalties except those resulting from the willful misconduct or gross
negligence of the Manager.

3. Materials, Equipment and Supplies. The cost of materials, equipment and
supplies (collectively “Material”) purchased from unaffiliated third parties or
furnished by a Member as provided in Section C.2. The Manager shall purchase or
furnish only so much Material as may be required for immediate use in efficient
and economical Operations. The Manager shall also maintain inventory levels of
Material at reasonable levels to avoid unnecessary accumulation of surplus
stock.
 
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4. Equipment and Facilities Furnished by Manager. The cost of machinery,
equipment and facilities owned by the Manager and used in Operations or used to
provide support or utility services to Operations charged at rates commensurate
with the actual costs of ownership and operation of such machinery, equipment
and facilities. Such rates shall include costs of maintenance, repairs, other
operating expenses, insurance, taxes, depreciation and interest at a rate not to
exceed Prime Rate plus three percent (3%) per annum. Such rates shall not exceed
the average commercial rates currently prevailing in the vicinity of the
Operations.
 
5. Transportation. Reasonable transportation costs incurred in connection with
the transportation of employees and material necessary for Operations.

6. Contract Services and Utilities. The cost of contract services and utilities
procured from outside sources, other than services described in Sections B.9 and
B.13. If contract services are performed by the Manager or a Manager’s
Affiliate, the cost charged to the Business Account shall not be greater than
that for which comparable services and utilities are available in the open
market within the vicinity of Operations. The cost of professional consultant
services procured from outside sources in excess of Twenty-Five Thousand Dollars
($25,000.00) per annum per contract shall not be charged to the Business Account
unless approved by the Management Committee.

7. Insurance Premiums. Net premiums paid for insurance required to be carried
for Operations for the protection of the Members. When Operations are conducted
in an area where the Manager may self-insure for Workers’ Compensation and/or
Employer’s Liability under state law, the Manager may elect to include such
risks in its self-insurance program and shall charge its costs of self-insuring
such risks to the Business Account provided that such charges shall not exceed
published manual rates.

8. Damages and Losses. All costs in excess of insurance proceeds necessary to
repair or replace damage or losses to any Assets resulting from any cause other
than the willful misconduct or gross negligence of the Manager. The Manager
shall furnish the Management Committee with written notice of damages or losses
as soon as practicable after a report thereof has been received by the Manager.

9. Legal and Regulatory Expense. Except as otherwise provided in Section B.13,
all legal and regulatory costs and expenses incurred in or resulting from
Operations or necessary to protect or recover the Assets of the Company,
including costs of title investigation and title curative services. All
attorney’s fees and other legal costs to handle, investigate and settle
litigation or claims, and amounts paid in settlement of such litigation or
claims in excess of Fifty Thousand Dollars ($50,000.00) per annum shall not be
charged to the Business Account unless approved by the Management Committee.

10. Audit. Cost of annual audits under Section 11.6.1 of the Agreement.

11. Taxes. All taxes, assessments and like charges on Operations and Assets
which have been paid by the Manager for the benefit of the Members. Each Member
is separately responsible for taxes determined or measured by a Member’s sales
revenue or net income.

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12. District and Camp Expense (Field Supervision and Camp Expenses). A pro rata
portion of: (1) the salaries and expenses of the Manager’s superintendent and
other employees serving Operations whose time is not allocated directly to such
Operations, and (2) the costs of maintaining and operating an office and any
necessary suboffice and (3) all necessary camps, including housing facilities
for employees, used for Operations. The expense of those facilities, less any
facilities revenue, shall include depreciation or a fair monthly rental in lieu
of depreciation of the investment. The total of such charges for all Properties
served by the Manager’s employees and facilities shall be apportioned to the
Business Account on the basis of a ratio to be approved by the Management
Committee.

13. Administrative Charge.

a. Each month, the Manager shall charge the Business Account a sum for each
phase of Operations as provided below, which shall be a liquidated amount to
reimburse the Manager for its home office overhead and general and
administrative expenses to conduct each phase of Operations, and which shall be
in lieu of any management fee and for taxes based on production of Products:

(1) Exploration Phase. Eight percent (8%) of Allowable Costs.

(2) Development Phase. Three percent (3%) of Allowable Costs.

(3) Major Construction Phase. Three percent (3%) of Allowable Costs.

(4) Mining Phase . Three percent (3%) of Allowable Costs.

b. The term “Allowable Costs” as used in this Section for a particular phase of
Operations shall mean all charges to the Business Account excluding: (1) the
administrative charge referred to in this Section B.13; (2) depreciation,
depletion or amortization of tangible or intangible Assets; (3) amounts charged
in accordance with Sections B.1 and B.9; and (4) marketing costs. The Manager
shall attribute such Allowable Costs to a particular phase of Operations by
applying the following guidelines:

(1) The Exploration Phase shall cover those Operations conducted to ascertain
the existence, location, extent or quantity of any deposit of ore or mineral.

(2)  The Development Phase shall cover those Operations, including
Pre-Feasibility and Feasibility Study Operations, conducted to assess a
commercially feasible ore body or to extend production of an existing ore body,
and to construct or install related fixed Assets.

(3)  The Major Construction Phase shall include all Operations involved in the
construction of a mill, smelter or other ore processing facilities.

(4)  The Mining Phase shall include all other Operations activities not
otherwise covered above, including activities conducted after Mining Operations
have ceased.

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c. Various phases of Operations may be conducted concurrently, in which event
the administrative charge shall be calculated separately for Allowable Costs
attributable to each phase.

d. The monthly administration charge determined for each phase of Operations
shall be a liquidated amount to reimburse Manager for its home office overhead
and general and administrative expenses for its conduct of Operations, and shall
be equitably apportioned among all of the properties served during such monthly
period on the basis of a ratio approved by the Management Committee.

e. The following is a representative list of items that constitute the Manager’s
principal business office expenses that are expressly covered by the
administrative charge provided in this Section, except to the extent that such
items are directly chargeable to the Business Account under other provisions of
this Section B:

(1)  Administrative supervision, which includes all services rendered by
managers, department supervisors, officers and directors of the Manager for
Operations;

(2)  Accounting, data processing, personnel administration, billing and record
keeping in accordance with governmental regulations and the provisions of the
Agreement, and preparation of reports;

(3)  The services of tax counsel and tax administration employees for all tax
matters, including any protests, except any outside professional fees which the
Management Committee may approve as a direct charge to the Business Account;

(4)  Routine legal services rendered by outside sources and the Manager’s legal
staff not otherwise charged to the Business Account under Section B.9, including
property acquisition, attorney management and oversight, and support services
provided by Manager’s legal staff concerning any litigation; and

(5)  Rentals and other charges for office and records storage space, telephone
service, office equipment and supplies.

f. The Management Committee shall annually review the administrative charges and
shall amend the methodology or rates used to determine such charges if they are
found to be insufficient or excessive based on the principles that the Manager
shall not make a profit or suffer a loss and that it should be fairly and
adequately compensated for its costs and expenses.

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14. Environmental Compliance Fund. Costs of reasonably anticipated Environmental
Compliance which, on a Program basis, shall be determined by the Management
Committee and shall be based on proportionate contributions in an amount
sufficient to establish a fund, which through successive proportionate
contributions during the life of the Company, will pay for ongoing Environmental
Compliance conducted during Operations and which will aggregate the reasonably
anticipated costs of mine closure, post-Operations Environmental Compliance and
Continuing Obligations. The Manager shall invest such amounts on behalf of the
Members as provided in Section 9.2.19 of the Agreement.

15. Other Expenditures. Any reasonable direct expenditure, other than
expenditures which are covered by the foregoing provisions, incurred by the
Manager for the necessary and proper conduct of Operations.

C. Basis of Charges to Business Account.

1. Purchases. Material purchased and services procured from third parties shall
be charged to the Business Account by the Manager at invoiced cost, including
applicable transfer taxes, less all discounts taken. If any Material is
determined to be defective or is returned to a vendor for any other reason, the
Manager shall credit the Business Account when an adjustment is received from
the vendor.

2. Material Furnished by a Member for Use in the Business. Any Material
furnished by a Member for use in the Business or distributed to a Member by the
Manager shall be priced on the following basis:

a. New Material. New Material furnished by a Member shall be priced F.O.B. the
nearest reputable supply store or railway receiving point, where like Material
is available, at the current replacement cost of the same kind of Material,
exclusive of any available cash discounts, at the time it is furnished (the “New
Price”).

b. Used Material. 

(1) Used Material in sound and serviceable condition and suitable for reuse
without reconditioning shall be priced as follows:

(a) Used Material furnished by a Member shall be priced at seventy-five percent
(75%) of the New Price;

(b)  Used Material distributed to a Member shall be priced (1) at seventy-five
percent (75%) of the New Price if such Material was originally charged to the
Business Account as new Material, or (2) at sixty-five percent (65%) of the New
Price if such Material was originally charged to the Business Account as good
used Material at seventy-five percent (75%) of the New Price.

(2) Other used Material that, after reconditioning, will be further serviceable
for original function as good secondhand Material, or that is serviceable for
original function but not substantially suitable for reconditioning, shall be
priced at fifty percent (50%) of New Price. The cost of any reconditioning shall
be borne by the transferee.

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(3) Bad-Order Material which is no longer usable for its original purpose
without excessive repair cost but further usable for some other purpose shall be
priced on a basis comparable with items normally used for that purpose.

(4) All other Material, including junk, shall be priced at a value commensurate
with its use or at prevailing prices.

c. Obsolete Material. Any Material that is serviceable and usable for its
original function, but its condition is not equivalent to that which would
justify a price as provided above, shall be priced by the Management Committee.
Such price shall be set at a level that will result in a charge to the Business
Account equal to the value of the service to be rendered by such Material.

3. Premium Prices. Whenever Material is not readily obtainable at published or
listed prices because of national emergencies, strikes or other unusual
circumstances over which the Manager has no control, the Manager may charge the
Business Account for the required Material on the basis of the Manager’s direct
cost and expenses incurred in procuring such Material and making it suitable for
use. The Manager shall give written notice of the proposed charge to the Members
before the time when such charge is to be billed, whereupon a Member shall have
the right, by notifying the Manager within ten days of the delivery of the
notice from the Manager, to furnish at the usual receiving point all or part of
its share of Material suitable for use and acceptable to the Manager.

4. Warranty of Material Furnished by the Manager or Members. Na Member warrants
any Material furnished beyond any dealer’s or manufacturer’s warranty and no
credits shall be made to the Business Account for defective Material until
adjustments are received by the Manager from the dealer, manufacturer or their
respective agents.

D. Disposal of Material.

1. Disposition Generally. The Manager shall have no obligation to purchase a
Member’s interest in Material. The Management Committee shall determine the
disposition of major items of surplus Material, provided the Manager shall have
the right to dispose of normal accumulations of junk and scrap Material either
by sale or by transfer to the Members as provided in Section C.2.b.4.

2. Distribution to Members. Any Material to be distributed to the Members shall
be made in proportion to their respective Participating Interests, and
corresponding credits shall be made to the Business Account on the basis
provided in Section B.

3. Sales. Sales of Material to third parties shall be credited to the Business
Account at the net amount received. Any damages or claims by the Purchaser shall
be charged back to the Business Account if and when paid.

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E. Inventories.

1. Periodic Inventories, Notice and Representations. At reasonable intervals,
inventories shall be taken by the Manager, which shall include all such Material
as is ordinarily considered controllable by operators of mining properties and
the expense of conducting such periodic inventories shall be charged to the
Business Account. The Manager shall give written notice to the Members of its
intent to take any inventory at least thirty (30) days before such inventory is
scheduled to take place. A Member shall be deemed to have accepted the results
of any inventory taken by the Manager if the Member fails to be represented at
such inventory.

2. Reconciliation and Adjustment of Inventories. Reconciliation of inventory
with charges to the Business Account shall be made, and a list of overages and
shortages shall be furnished to the Management Committee within six (6) months
after the inventory is taken. Inventory adjustments shall be made by the Manager
to the Business Account for overages and shortages, but the Manager shall be
held accountable to the Company only for shortages due to lack of reasonable
diligence.

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Exhibit C

Lincoln Hill LLC
Operating Agreement

Tax Matters

A. Effect of This Exhibit. This Exhibit shall govern the relationship of the
Members and the Company with respect to tax matters and the other matters which
this Exhibit addresses. Except as otherwise indicated, capitalized terms used in
this Exhibit shall have the meanings given to them in the Agreement. In the
event of a conflict between this Exhibit and the other provisions of the
Agreement, the terms of this Exhibit shall control.

B. Tax Matters Partner

1. Designation of Tax Matters Partner. The Manager is designated the tax matters
partner (the “TMP”) as defined in Section 6231(a)(7) of the Internal Revenue
Code of 1986 (“the Code”) and shall be responsible for, make elections for, and
prepare and file any federal and state tax returns or other required tax forms
following approval of the Management Committee. In the event of any change in
Manager, the Member serving as Manager at the end of a taxable year shall
continue as TMP with respect to all matters concerning such year unless the TMP
for that year is required to be changed pursuant to applicable Treasury
Regulations. The TMP and each other Member shall use reasonable best efforts to
comply with the responsibilities outlined in this Section 2 and in Sections 6221
through 6233 of the Code (including any Treasury regulations promulgated
thereunder) and in doing so shall incur no liability to any other party.

2. Notice. Each Member shall furnish the TMP with such information (including
information specified in Section 6230(e) of the Code) as it may reasonably
request to permit it to provide the Internal Revenue Service with sufficient
information to allow proper notice to the Members in accordance with Section
6223 of the Code. The TMP shall keep each Member informed of all administrative
and judicial proceedings for the adjustment at the partnership level of
partnership items in accordance with Section 6223(g) of the Code.
 
3. Inconsistent Treatment of Tax Item. If an administrative proceeding
contemplated under Section 6223 of the Code has begun, and the TMP so requests,
each Member shall notify the TMP of its treatment of any partnership item on its
federal income tax return that is inconsistent with the treatment of that item
on the partnership return.

4. Extensions of Limitation Periods. The TMP shall not enter into any extension
of the period of limitations as provided under Section 6229 of the Code without
first giving reasonable advance notice to each other Member of such intended
action.

5. Requests for Administrative Adjustments. No Member shall file, pursuant to
Section 6227 of the Code, a request for an administrative adjustment of
partnership items for any taxable year of the Company without first notifying
each other Member. If each other Member agrees with the requested adjustment,
the TMP shall file the request for administrative adjustment on behalf of the
Company. If consent is not obtained within thirty (30) days after notice from
the proposing Member, or within the period required to timely file the request
for administrative adjustment, if shorter, a Member, including the TMP, may file
that request for administrative adjustment on its own behalf.

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6. Judicial Proceedings. A Member intending to file a petition under Section
6226, 6228 or other sections of the Code with respect to any partnership item,
or other tax matters involving the Company, shall notify each other Member of
such intention and the nature of the contemplated proceeding. If the TMP is the
Member intending to file such petition, such notice shall be given within a
reasonable time to allow each other Member to participate in the choosing of the
forum in which such petition will be filed. If all Members do not agree on the
appropriate forum, then the appropriate forum shall be decided in accordance
with Section 8.2 of the Agreement. If a deadlock results, the TMP shall choose
the forum. If a Member intends to seek review of any court decision rendered as
a result of a proceeding instituted under the preceding part of this Section,
each such Member shall notify each other Member of such intended action.

7. Settlements. The TMP shall not bind any other Member to a settlement
agreement without first obtaining the written consent of any such Member. A
Member who enters into a settlement agreement for its own account with respect
to any partnership items, as defined by Section 6231(a)(3) of the Code, shall
notify each other Member of such settlement agreement and its terms within
ninety (90) days from the date of settlement.

8. Fees and Expenses. The TMP shall not engage legal counsel, certified public
accountants, or others without the prior consent of the Management Committee. A
Member may engage legal counsel, certified public accountants, or others in its
own behalf and at its sole cost and expense. Any reasonable item of expense,
including but not limited to fees and expenses for legal counsel, certified
public accountants, and others which the TMP incurs (after proper consent by the
Management Committee as provided above) in connection with any audit,
assessment, litigation, or other proceeding regarding any partnership item,
shall constitute proper charges to the Business Account and shall be borne by
the Members as any other item which constitutes a direct charge to the Business
Account pursuant to the Agreement.

9. Survival. The provisions of the foregoing Sections, including but not limited
to the obligation to pay fees and expenses contained in Section B.8, shall
survive the termination of the Company or the termination of a Member’s interest
in the Company and shall remain binding on the Members for a period of time
necessary to resolve with the Internal Revenue Service or the Department of the
Treasury any and all matters regarding the federal income taxation of the
Company for the applicable tax year(s).

C. Tax Elections and Allocations.
 
1. Company Election. It is understood and agreed that the Members intend to
create a partnership for United States federal and state income tax purposes,
and, unless otherwise agreed to hereafter by all Members, no Member shall take
any action to change the status of the Company as a partnership under Treas.
Reg. § 1.7701-3 or similar provision of state law. It is understood and agreed
that the Members intend to create a partnership for federal and state income tax
purposes only. The Manager shall file with the appropriate office of the
Internal Revenue Service a partnership income tax return covering the
Operations. The Members recognize that the Agreement may be subject to state
income tax statutes. The Manager shall file with the appropriate offices of the
state agencies any required partnership state income tax returns. Each Member
agrees to furnish to the Manager any information it may have relating to
Operations as shall be required for proper preparation of such returns. The
Manager shall furnish to each other Member for its review a copy of each
proposed income tax return at least two weeks prior to the date the return is
filed.

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2. Tax Elections. The Company shall make the following elections for purposes of
all partnership income tax returns:

a. To use the accrual method of accounting.
 
b. Pursuant to the provisions at Section 706(b)(1) of the Code, to use as its
taxable year the year ended December 31. In this connection, WGI represents that
its taxable year is the year ending December 31 and Coolcharm represents its
taxable year is the year ending December 31.

c. To deduct currently all development expenses to the extent possible under
Section 616 of the Code.

d. Unless the Members unanimously agree otherwise, to compute the allowance for
depreciation in respect of all depreciable Assets using the maximum accelerated
tax depreciation method and the shortest life permissible or, at the election of
the Manager, using the units of production method of depreciation.

e. To treat advance royalties as deductions from gross income for the year paid
or accrued to the extent permitted by law.

f. To adjust the basis of property of the Company under Section 754 of the Code
at the request of a Member;

g. To amortize over the shortest permissible period all organizational
expenditures and business start-up expenses under Sections 195 and 709 of the
Code;

Any other election required or permitted to be made by the Company under the
Code or any state tax law shall be made as determined by the Management
Committee.

Each Member shall elect under Section 617(a) of the Code to deduct currently all
exploration expenses. Each Member reserves the right to capitalize its share of
development and/or exploration expenses of the Company in accordance with
Section 59(e) of the Code, provided that a Member’s election to capitalize all
or any portion of such expenses shall not affect the Member’s Capital Account.

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3. Allocations to Members. Allocations for Capital Account purposes shall be in
accordance with the following:

a. Exploration expenses and development cost deductions shall be allocated among
the Members in accordance with their respective contributions to such expenses
and costs.

b. Depreciation and amortization deductions with respect to a depreciable Asset
shall be allocated among the Members in accordance with their respective
contributions to the adjusted basis of the Asset which gives rise to the
depreciation, amortization or loss deduction.

c. Production and operating cost deductions shall be allocated among the Members
in accordance with their respective contributions to such costs.

d. Deductions for depletion (to the extent of the amount of such deductions that
would have been determined for Capital Account purposes if only cost depletion
were allowable for federal income tax purposes) shall be allocated to the
Members in accordance with their respective contributions to the adjusted basis
of the depletable property. Any remaining depletion deductions shall be
allocated to the Members so that, to the extent possible, the Members receive
the same total amounts of percentage depletion as they would have received if
percentage depletion were allocated to the Members in proportion to their
respective shares of the gross income used as the basis for calculating the
federal income tax deduction for percentage depletion.

e. Subject to Section C.3.g. below, gross income on the sale of production shall
be allocated in accordance with the Members’ rights to share in the proceeds of
such sale.

f. Except as provided in Section C.3.g., below, gain or loss on the sale of a
depreciable or depletable asset shall be allocated so that, to the extent
possible, the net amount reflected in the Members’ Capital Account with respect
to such property (taking into account the cost of such property, depreciation,
amortization, depletion or other cost recovery deductions and gain or loss) most
closely reflects the Members’ Ownership Interests.

g. Gains and losses on the sale of all or substantially all the Assets of the
Company shall be allocated so that, to the extent possible, the Members’
resulting Capital Account balances are in the same ratio as their Ownership
Interests at the time of such sale.

h. The Members acknowledge that expenses and deductions allocable under the
preceding provisions of this Section may be required to be capitalized into
production under Section 263A of the Code. With respect to such capitalized
expenses or deductions, the allocation of gross income on the sale of production
shall be adjusted, in any reasonable manner consistently applied by the Manager,
so that the same net amount (subject possibly to timing differences) is
reflected in the Capital Accounts as if such expenses or deductions were instead
deductible and allocated pursuant to the preceding provisions of this Section.

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i. All deductions and losses that are not otherwise allocated in this Section
shall be allocated among the Members in accordance with their respective
contributions to the costs producing each such deduction or to the adjusted
basis of the Asset producing each such loss.

j. Any recapture of exploration expenses under Section 617(b)(1)(A) of the Code,
and any disallowance of depletion under Section 617(b)(1)(B) of the Code, shall
be borne by the Members in the same manner as the related exploration expenses
were allocated to, or claimed by, them.

k. All other items of income and gain shall be allocated to the Members in
accordance with their Ownership Interests.

l. If a reduced Ownership Interest is restored pursuant to Section 10.6 of the
Agreement, the Manager shall endeavor to allocate items of income, gain, loss,
and deduction (in the same year as the restoration of such Ownership Interest
or, if necessary, in subsequent years) so as to cause the Capital Account
balances of the Members to be the same as they would have been if the restored
Ownership Interest had never been reduced.

m. If the Members’ Ownership Interests change during any taxable year of the
Company, the distributive share of items of income, gain, loss and deduction of
each Member shall be determined in any manner (1) permitted by Section 706 of
the Code, and (2) agreed by all Members. If the Members cannot agree on a
method, the method shall be determined by the Manager in consultation with the
Company’s tax advisers, with preference given to the interim
closing-of-the-books method except where application of that method would result
in undue administrative expense in relationship to the amount of the items to be
allocated.

n. For purposes of this Section C.3, items financed through indebtedness of, or
from revenues of, the Company shall be treated as funded from contributions made
by the Members to the Company in accordance with their Ownership Interests.
“Nonrecourse deductions,” as defined by Treas. Reg. § 1.704-2(b)(1) shall be
allocated among the Members in proportion to their Ownership Interests.

4. Regulatory Allocations. Notwithstanding the provisions of Section C.3 to the
contrary, the following special allocations shall be given effect for purposes
of maintaining the Members’ Capital Accounts.

a. If a Member unexpectedly receives any adjustments, allocations, or
distributions described in Treas. Reg. § 1.704-1(b)(2)(ii)(d)(4), §
1.704-1(b)(2)(ii)(d)(5) or § 1.704-1(b)(2)(ii)(d)(6), which result in a deficit
Capital Account balance, items of income and gain shall be specially allocated
to each such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Capital Account deficit of such
Member as quickly as possible. For the purposes of this Section C.4.a, each
Member’s Capital Account balance shall be increased by the sum of (1) the amount
such Member is obligated to restore pursuant to any provision of the Agreement,
and (2) the amount such Member is deemed to be obligated to restore pursuant to
the penultimate sentences of Treas. Reg. §§ 1.704-2(g)(1) and 1.704-2(i)(5).
 
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b. If there is a net decrease in partnership minimum gain for a taxable year of
the Company, each Member shall be allocated items of income and gain for that
year equal to that Member’s share of the net decrease in partnership minimum
gain, all in accordance with Treas. Reg. § 1.704-2(f). If, during a taxable year
of the Company, there is a net decrease in partner nonrecourse debt minimum
gain, any Member with a share of that partner nonrecourse debt minimum gain as
of the beginning of the year shall be allocated items of income and gain for the
year (and, if necessary, for succeeding years) equal to that partner’s share of
the net decrease in partner nonrecourse debt minimum gain, all in accordance
with Treas. Reg. § 1.704-2(i)(4). Pursuant to Treas. Reg. § 1.704-2(i)(1),
deductions attributable to “partner nonrecourse liability” shall be allocated to
the Member that bears the economic risk of loss for such liability (or is
treated as bearing such risk).

c. If the allocation of deductions to a Member would cause such Member to have a
deficit Capital Account balance at the end of any taxable year of the Company
(after all other allocations provided for in this Section C.4 have been made and
after giving effect to the adjustments described in Section C.4.a), such
deductions shall instead be allocated to each other Member.

5. Curative Allocations. The allocations stated in Section C.4 (the “Regulatory
Allocations”) are intended to comply with certain requirements of the Treasury
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of income, gain, loss or deduction
pursuant to this Section. Therefore, notwithstanding any other provisions of
this Section 3 (other than the Regulatory Allocations), the Manager shall make
such offsetting special allocations of income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member’s Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all items were
allocated pursuant to Section C.3 without regard to Section C.4.

6. Tax Allocations. Except as otherwise provided in this Section C.6, items of
taxable income, deduction, gain and loss shall be allocated in the same manner
as the corresponding item is allocated for book purposes under Sections C.3, C.4
and C.5 of the corresponding item determined for Capital Account purposes.

a. Recapture of tax deductions arising out of a disposition of property shall,
to the extent consistent with the allocations for tax purposes of the gain or
amount realized giving rise to such recapture, be allocated to the Members in
the same proportions as the recaptured deductions were originally allocated or
claimed.

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b. To the extent required by Section 704(c) of the Code, income, gain, loss, and
deduction with respect to property contributed to the Company by a Member shall
be shared among the Members so as to take account of the variation between the
basis of the property to the Company and its fair market value at the time of
contribution. The Members intend that Section 704(c) shall effect no allocations
of tax items that are different from the allocations under Sections C.3, C.4 and
C.5 of the corresponding items for Capital Account purposes; provided that gain
or loss on the sale of property contributed to the Company shall be allocated to
the contributing member to the extent of built-in gain or loss, respectively, as
determined under Treas. Reg. § 1.704-3(a). However, to the extent that
allocations of other tax items are required pursuant to Section 704(c) of the
Code to be made other than in accordance with the allocations under Sections
C.3, C.4 and C.5 of the corresponding items for Capital Account purposes,
Section 704(c) shall be applied in accordance with the method available under
Treas. Reg. § 1.704-3 which most closely approximates the allocations stated in
Sections C.3, C.4 and C.5.

c. Depletion deductions with respect to contributed property shall be determined
without regard to any portion of the property’s basis that is attributable to
precontribution expenditures by WGI that were capitalized under Code Sections
616(b), 59(e) and 291(b). Deductions attributable to precontribution
expenditures by WGI shall be calculated under such Code Sections as if WGI
continued to own the depletable property to which such deductions are
attributable, and such deductions shall be reported by the Company and shall be
allocated solely to WGI.

d. The Members understand the allocations of tax items stated in this Section
C.6, and agree to report consistently with such allocations for federal and
state tax purposes.

D. Capital Accounts; Liquidation

1. Capital Accounts.

a. A separate Capital Account shall be established and maintained by the TMP for
each Member. Such Capital Account shall be increased by (1) the amount of money
contributed by the Member to the Company, (2) the fair market value of property
contributed by the Member to the Company (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to
under Code Section 752) and (3) allocations to the Member under Sections C.3,
C.4 and C.5 of Company income and gain (or items thereof), including income and
gain exempt from tax; and shall be decreased by (4) the amount of money
distributed to the Member by the Company, (5) the fair market value of property
distributed to the Member by the Company (net of liabilities secured by such
distributed property and that the Member is considered to assume or take subject
to under Code Section 752), (6) allocations to the Member under Sections C.3,
C.4 and C.5 of expenditures of the Company not deductible in computing its
taxable income and not properly chargeable to a Capital Account, and (7)
allocations of Company loss and deduction (or items thereof), excluding items
described in (8) above and percentage depletion to the extent it exceeds the
adjusted tax basis of the depletable property to which it is attributable. The
Members agree that the net fair market value of the property contributed by WGI
to the Company pursuant to Section 3.1.1 of the Agreement is 6.6 million.

b. In the event that the Capital Accounts of the Members are computed with
reference to the book value of any Asset which differs from the adjusted tax
basis of such Asset, then the Capital Accounts shall be adjusted for
depreciation, depletion, amortization and gain or loss as computed for book
purposes with respect to such Asset in accordance with Treas. Reg. § 1.704-1(b)
(2)(iv)(g).

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c. In the event any interest in the Company is transferred in accordance with
the terms of the Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred interest, except
as provided in Treas. Reg. § 1.704-1(b)(2)(iv)(1).

d. In the event property, other than money, is distributed to a Member, the
Capital Accounts of the Members shall be adjusted to reflect the manner in which
the unrealized income, gain, loss and deduction inherent in such property (that
has not been reflected in the Capital Accounts previously) would be allocated
among the Members if there was a taxable disposition of such property for the
fair market value of such property (taking Section 7701(g) of the Code into
account) on the date of distribution. For this purpose the fair market value of
the property shall be determined as stated in Section D.2.a below.

e. In the event the Management Committee designates a Supplemental Business
Arrangement area within the Area of Interest as described in Section 10.13 of
the Agreement, the Management Committee shall appropriately segregate Capital
Accounts to reflect that designation and shall make such other modifications to
the Agreement as are appropriate to reflect the manner of administering Capital
Accounts in accordance with the terms of this Exhibit C.

f. WGI is contributing to the Agreement certain depletable properties with
respect to which WGI currently has an adjusted tax basis which may consist in
part of depletable expenditures and in part of expenditures capitalized under
Code Sections 616(b), 291(b) and/or 59(e). For purposes of maintaining the
Capital Accounts, the Company’s deductions with respect to contributed property
in each year for (1) depletion, (2) deferred development expenditures under
Section 616(b) attributable to pre-contribution expenditures, (3) amortization
under Section 291(b) attributable to pre-contribution expenditures, and (4)
amortization under Section 59(e) attributable to pre-contribution expenditures
shall be the amount of the corresponding item determined for tax purposes
pursuant to Section C.6.c multiplied by the ratio of (1) the book value at which
the contributed property is recorded in the Capital Accounts to (2) the adjusted
tax basis of the contributed property (including basis resulting from
capitalization of pre-contribution development expenditures under Sections
616(b), 291(b), and 59(e)).

g. The foregoing provisions, and the other provisions of the Agreement relating
to the maintenance of Capital Accounts and the allocations of income, gain,
loss, deduction and credit, are intended to comply with Treasury Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the Management Committee shall determine
that it is prudent to modify the manner in which the Capital Accounts, or any
debits or credits thereto, are computed in order to comply with such
Regulations, the Management Committee may make such modification, provided that
it is not likely to have a material effect on the amount distributable to a
Member upon liquidation of the Company pursuant to Section D.2.

h. If the Members so agree, upon the occurrence of an event described in Treas.
Reg. § 1.704-1(b)(2)(iv)(5), the Capital Accounts shall be restated in
accordance with Treas. Reg. § 1.704-1(b)(2)(iv)(f) to reflect the manner in
which unrealized income, gain, loss or deduction inherent in the assets of the
Company (that has not been reflected in the Capital Accounts previously) would
be allocated among the Members if there were a taxable disposition of such
assets for their fair market values, as determined in accordance with Section
D.2.a. For purposes of Section C.3, a Member shall be treated as contributing
the portion of the book value of any property that is credited to the Member’s
Capital Account pursuant to the preceding sentence. Following a revaluation
pursuant to this Section D.1.h, the Members’ shares of depreciation, depletion,
amortization and gain or loss, as computed for tax purposes, with respect to
property that has been revalued pursuant to this Section D.1.h shall be
determined in accordance with the principles of Code Section 704(c) as applied
pursuant to the final sentence of Section C.6.b.

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2. Liquidation. In the event the Company is dissolved pursuant to Section 14.1
of the Agreement then, notwithstanding any other provision of the Agreement to
the contrary, the following steps shall be taken (after taking into account any
transfers of Capital Accounts pursuant to Sections 3.2.1, 4.4.1 or 14.2 of the
Agreement):

a. The Capital Accounts of the Members shall be adjusted to reflect any gain or
loss which would be realized by the Company and allocated to the Members
pursuant to the provisions of Section C of this Exhibit C if the Assets had been
sold at their fair market value at the time of liquidation. The fair market
value of the Assets shall be determined by agreement of all Members provided,
however, that in the event that the Members fail to agree on the fair market
value of any Asset, its fair market value shall be determined by a nationally
recognized independent engineering firm or other qualified independent party
approved by all Members.

b. After making the foregoing adjustments and/or contributions, all remaining
Assets shall be distributed to the Members in accordance with the balances in
their Capital Accounts (after taking into account all allocations under Section
C, including Section C.3.g). Unless otherwise expressly agreed by the Members,
each Member shall receive an undivided interest in each and every Asset
determined by the ratio of the amount in each Member’s Capital Account to the
total of both of the Members’ Capital Accounts. Assets distributed to the
Members shall be deemed to have a fair market value equal to the value assigned
to them pursuant to Section D.2.a above.

c. All distributions to the Members in respect of their Capital Accounts shall
be made in accordance with the time requirements of Treas. Reg. §§
1.704-1(b)(2)(ii)(b)(2) and (3).

3. Deemed Terminations. Notwithstanding the provisions of Section D.2, if the
“liquidation” of the Company results from a deemed termination under Section
708(b)(1)(B) of the Code, then (1) Sections D.2.a and D.2.b shall not apply, (2)
the Company shall be deemed to have contributed its assets to a new partnership
in exchange for an interest therein, and immediately thereafter, distributing
interests to the purchasing party and the non-transferring Members in proportion
to their interests in the Company’s liquidation, (3) the new partnership shall
continue pursuant to the terms of the Agreement and this Exhibit.

E. Sale or Assignment.

The Members agree that if either one of them makes a sale or assignment of its
Ownership Interest under the Agreement, and such sale or assignment causes a
termination under Section 708(b)(1)(B) of the Code, the terminating Member shall
indemnify the non-terminating Member and save it harmless on an after-tax basis
for any increase in taxes to the non-terminating Member caused by the
termination of the Company.
 
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Exhibit D
 
Lincoln Hill LLC
Operating Agreement
 
Definitions

“Act” means Chapter 86 of the Nevada Revised Statutes.

“Affiliate” means any person, partnership, limited liability company, joint
venture, corporation, or other form of enterprise which Controls, is Controlled
by, or is under common Control with a Member.

“Agreement” means this Exploration, Development and Mining Limited Liability
Company Operating Agreement, including all amendments and modifications, and all
schedules and exhibits, all of which are incorporated by this reference.

“Approved Alternative” means a Development and Mining alternative selected by
the Management Committee from various Development and Mining alternatives
analyzed in the Pre-Feasibility Studies.

“Area of Interest” means the area described in Section 1.3 of Exhibit A.

“Assets” means the Properties, Products, Business Information, and all other
real and personal property, tangible and intangible, including existing or
after-acquired properties and all contract rights held for the benefit of the
Members.

“Budget” means a detailed estimate of all costs to be incurred and a schedule of
cash advances to be made by the Members with respect to a Program.

“Business” means the conduct of the business of the Company in furtherance of
the purposes stated in Section 2.3 and in accordance with this Agreement.

“Business Account” means the account maintained by the Manager for the Business
in accordance with Exhibit B.

“Business Information” means the terms of this Agreement, and any other
agreement relating to the Business, the Existing Data, and all information,
data, knowledge and know-how, in whatever form and however communicated
(including, without limitation, Confidential Information), developed, conceived,
originated or obtained by either Member in performing its obligations under this
Agreement. The term “Business Information” shall not include any improvements,
enhancements, refinements or incremental additions to Member Information that
are developed, conceived, originated or obtained by either Member in performing
its obligations under this Agreement.

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“Capital Account” means the account maintained for each Member in accordance
with Exhibit C.

“Company” means Lincoln Hill LLC, a Nevada limited liability company formed in
accordance with, and 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.

“Continuing Obligations” mean obligations or responsibilities that are
reasonably expected to continue or arise after Operations on a particular area
of the Properties have ceased or are suspended, such as future monitoring,
stabilization, or Environmental Compliance.

“Control” used as a verb means, when used with respect to an entity, the
ability, directly or indirectly through one or more intermediaries, to direct or
cause the direction of the management and policies of such entity through (i)
the legal or beneficial ownership of voting securities or membership interests;
(ii) the right to appoint managers, directors or corporate management; (iii)
contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when
used with respect to a person, means the actual or legal ability to control the
actions of another, through family relationship, agency, contract or otherwise;
and “Control” used as a noun means an interest which gives the holder the
ability to exercise any of the foregoing powers.

“Cover Payment” shall have the meaning as stated in Section 11.4 of the
Agreement.

“Development” means all preparation (other than Exploration) for the removal and
recovery of Products, including construction and installation of a mill or any
other improvements to be used for the mining, handling, milling, processing, or
other beneficiation of Products, and all related Environmental Compliance.

“Effective Date” means the date stated in the preamble to this Agreement.

“Encumbrance” or “Encumbrances” means mortgages, deeds of trust, security
interests, pledges, liens, net profits interests, royalties or overriding
royalty interests, other payments out of production, or other burdens of any
nature.

“Environmental Compliance” means actions performed during or after Operations to
comply with the requirements of all Environmental Laws or contractual
commitments related to reclamation of the Properties or other compliance with
Environmental Laws.
 
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“Environmental Compliance Fund” means the account established pursuant to
Section 2.14 of Exhibit B.

“Environmental Laws” means Laws aimed at reclamation or restoration of the
Properties; abatement of pollution; protection of the environment; protection of
wildlife, including endangered species; ensuring public safety from
environmental hazards; protection of cultural or historic resources; management,
storage or control of hazardous materials and substances; releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances as wastes into the environment, including without
limitation, ambient air, surface water and groundwater; and all other Laws
relating to the manufacturing, processing, distribution, use, treatment,
storage, disposal, handling or transport of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes.

“Environmental Liabilities” means any and all claims, actions, causes of action,
damages, losses, liabilities, obligations, penalties, judgments, amounts paid in
settlement, assessments, costs, disbursements, or expenses (including, without
limitation, attorneys’ fees and costs, experts’ fees and costs, and consultants’
fees and costs) of any kind or of any nature whatsoever that are asserted
against a Member, by any person or entity other than the other Members, 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 (1) 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; (2) physical disturbance of the environment; or (3) the violation or
alleged violation of any Environmental Laws.

“Equity Account” means the account maintained for each Member by the Manager in
accordance with Section 9.2.15 of the Agreement.

“Existing Data” means maps, drill logs and other drilling data, core, pulps,
reports, surveys, assays, analyses, production reports, operations, technical,
accounting and financial records, and other material information developed in
operations on the Properties before the Effective Date.

“Expansion” or “Modification” means (1) a material increase in mining or
production capacity; (2) a material change in the recovery process; or (3) a
material change in waste or tailings disposal methods. An increase or change
shall be deemed “material” if it is anticipated to cost more than 25% of
original capital costs attributable to the Development of the mining or
production capacity, recovery process or waste or tailings disposal facility to
be expanded or modified.

“Exploration” means all activities directed toward ascertaining the existence,
location, quantity, quality or commercial value of deposits of Products,
including but not limited to additional drilling required after discovery of
potentially commercial precious metal mineralization, and including related
Environmental Compliance.
 
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“Feasibility Contractors” means one or more engineering firms approved by the
Management Committee for purposes of preparing or auditing any Pre-Feasibility
Study or Feasibility Study.

“Feasibility Study” means a report to be prepared following selection by the
Management Committee of one or more Approved Alternatives. The Feasibility Study
shall include a review of information presented in any Pre-Feasibility Studies
concerning the Approved Alternative(s). The Feasibility Study shall be in a form
and of a scope generally acceptable to reputable financial institutions that
provide financing to the mining industry.

“Governmental Fees” means all location fees, mining claim rental fees, mining
claim maintenance payments and similar payments required by Law to locate and
hold unpatented mining claims.

“Initial Capital Contribution” means that contribution each Member has made or
agrees to make pursuant to Section 3.1 of the Agreement.

“Law” or “Laws” means all applicable federal, state and local laws (statutory or
common), rules, ordinances, regulations, grants, concessions, franchises,
licenses, orders, directives, judgments, decrees, and other governmental
restrictions, including permits and other similar requirements, whether
legislative, municipal, administrative or judicial in nature.

“Management Committee” means the committee established under Section 8 of the
Agreement.

“Manager” means the Member appointed under Section 9 of the Agreement to manage
Operations, or any successor Manager.

“Member” means Western Goldfields, Inc. or Coolcharm Ltd., any permitted
successor or assign of Western Goldfields, Inc. or Coolcharm Ltd., or any other
person admitted as a Member of the Company under this Agreement.

“Member Information” means all information, data, knowledge and know-how, in
whatever form and however communicated (including, without limitation,
Confidential Information but excluding the Existing Data), which, as shown by
written records, was developed, conceived, originated or obtained by a Member:
(1) before entering into this Agreement, or (2) independent of its performance
under the terms of this Agreement.

"Minerals" means gold, silver, platinum, antimony, mercury, copper, lead, zinc,
and all other precious metal mineral elements and precious metal mineral
compounds, and geothermal resources, which are contemplated to exist on the
Properties or which are after the Effective Date discovered on the Properties
and which can be extracted, mined or processed by any method presently known or
developed or invented after the Effective Date.

“Mining” means the mining, extracting, producing, beneficiating, handling,
milling or other processing of Products.
 
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“Net Proceeds” means certain amounts calculated as provided in Exhibit E, which
may be payable to a Member under Sections 4.4.2 or 11.5.2.2 of the Agreement.

“Net Smelter Returns” means certain amounts calculated as provided in Exhibit E,
which may be payable to a Member under Section 4.4.2 of the Agreement.

“Operations” means the activities carried out by the Company under this
Agreement.

“Ownership Interest” means the percentage interest representing the ownership
interest of a Member in the Company, and all other rights and obligations
arising under this Agreement, as such interest may from time to time be adjusted
hereunder. Ownership Interests shall be calculated to three decimal places and
rounded to two decimal places as follows: Decimals of .005 or more shall be
rounded up (e.g., 1.519% rounded to 1.52%); decimals of less than .005 shall be
rounded down (e.g., 1.514% rounded to 1.51%). The initial Ownership Interests of
the Members are stated in Section 4.1 of the Agreement.

“Payout” means the date on which the Equity Account balance of each of the
Members has become zero or a negative number, regardless of whether the Equity
Account balance of either or both Members subsequently becomes a positive
number. If one Member’s Equity Account balance becomes zero or a negative number
before the other Member’s, “Payout” shall not occur until the date that the
other Member’s Equity Account balance first becomes zero or a negative number.

“Pre-Feasibility Studies” means one or more studies prepared to analyze whether
economically viable Mining Operations may be possible on the Properties, as
described in Sections 10.7 and 10.8 of the Agreement.

“Prime Rate” means the interest rate quoted and published as “Prime” as
published in The Wall Street Journal, under the heading “Money Rate,” as the
rate may change from day to day.

“Products” means all precious metal ores, precious metal minerals and precious
metal mineral resources produced from the Properties. Products dose not include
any industrial minerals, ores, stone products, aggregate, sands, gravel or
industrial mineral resources produced from the Properties.

“Program” means a description in reasonable detail of Operations to be conducted
and objectives to be accomplished by the Manager for a period determined by the
Management Committee.

“Program Period” means the time period covered by an adopted Program and Budget.

“Project Financing” means any financing approved by the Management Committee and
obtained by the Members for the purpose of placing a mineral deposit situated on
the Properties into commercial production, but shall not include any such
financing obtained individually by either Member to finance payment or
performance of its obligations under the Agreement.
 
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“Properties” means those interests in real property described in Section 1.1 of
Exhibit A and all other interests in real property within the Area of Interest
that are acquired and held subject to this Agreement.

“Recalculated Ownership Interest” means the reduced Ownership Interest of a
Member as recalculated under Section 10.5, 10.6 or 11.5 of the Agreement.

“Reduced Member” means a Member whose Ownership Interest is reduced under
Section 10.5, 10.6 or 11.5 of the Agreement.

“Transfer” means, when used as a verb, to sell, grant, assign or create an
Encumbrance, pledge or otherwise convey, or dispose of or commit to do any of
the foregoing, or to arrange for substitute performance by an Affiliate or third
party (except as permitted under Section 9.2.10 and Section 9.6 of the
Agreement), either directly or indirectly; and, when used as a noun, means such
a sale, grant, assignment, Encumbrance, pledge or other conveyance or
disposition, or such an arrangement.
 
25

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Exhibit E

Lincoln Hill LLC
Operating Agreement

Net Proceeds Calculations

All capitalized words and terms used herein have the same meaning as in the
Agreement.

Net Proceeds Calculation

A. Income and Expenses. Net Proceeds shall be calculated by deducting from the
Gross Revenue (as defined below) realized (or deemed to be realized), such costs
and expenses attributable to Exploration, Development, Mining, the marketing of
Products and other Operations as would be deductible under generally accepted
accounting principles and practices consistently applied, including without
limitation:

1. All costs and expenses of replacing, expanding, modifying, altering or
changing from time to time the Mining facilities. Costs and expenses of
improvements (such as haulage ways or mill facilities) that are also used in
connection with workings other than the Properties shall be charged to the
Properties only in the proportion that their use in connection with the
Properties bears to their total use;

2. Ad valorem real Properties and unsecured personal Properties taxes, and all
taxes, other than income taxes, applicable to Mining of the Properties,
including without limitation all state mining taxes, sales taxes, severance
taxes, license fees and governmental levies of a similar nature;

3. Allowance for overhead in accordance with Section B.13 of Exhibit B;

4. All expenses incurred relative to the sale of Products, including an
allowance for commissions at rates which are normal and customary in the
industry;

5. All amounts payable to the remaining Member during Mining pursuant to any
applicable operating or similar agreement in force with respect thereto;

6. The actual cost of investment under the Agreement but before beginning of
Mining, which shall include all expenditures for Exploration and Development of
the Properties incurred by the non-withdrawing Member both before and after the
withdrawing Member acquiring a Net Proceeds interest;

7. Interest on monies borrowed or advanced for costs and expenses, but in no
event in excess of the maximum permitted by law;

8. An allowance for reasonable working capital and inventory;
 
26

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9. Costs of funding the Environmental Compliance Fund as provided in Section
B.14 of Exhibit B;

10. Actual costs of Operations; and

11. Rental, royalty, production, and purchase payments.

The term “Gross Revenue” shall mean the sum of (1) gross receipts from sale of
Products, less any charges for sampling, assaying, or penalties; (2) gross
receipts from the sale or other disposition of Assets; (3) insurance proceeds;
(4) compensation for expropriation of Assets; and (5) judgment proceeds. Gross
receipts for sale of Products shall be determined by multiplying spot prices for
Products as quoted by the Wall Street Journal on the date of a sale of Products
and if the Wall Street Journal does not provide a spot price quote for the
commodity, by Metals Week or another publication recognized in the mining
industry as a publisher of accurate commodities spot prices.

It is intended that the remaining Member shall recoup from Gross Revenue all of
its on-going contributions for Exploration, Development, Mining, Expansion and
Modification and marketing Products before any Net Proceeds are distributed to
any person holding a Net Proceeds interest. No deduction shall be made for
income taxes, depreciation, amortization or depletion. If in any year after the
beginning of Mining of the Properties an operating loss is incurred, the
operating loss amount shall be considered as and be included with outstanding
costs and expenses and carried forward in determining Net Proceeds for
subsequent periods. If Products are processed by the remaining Member, or are
sold to an Affiliate of the remaining Member, then, for purposes of calculating
Net Proceeds, such Products shall be deemed conclusively to have been sold at a
price equal to fair market value to arm’s length purchaser FOB the concentrator
for the Properties, and the resulting Net Proceeds shall be calculated without
reference to any profits or losses attributable to smelting or refining.

B. Payment of Net Proceeds. Payments of Net Proceeds shall commence in the
calendar year following the calendar year in which Net Proceeds are first
realized, and shall be made forty-five (45) days following the end of each
calendar quarter during which Net Proceeds are realized, and shall be subject to
adjustment, if required, at the end of each calendar year. The recipient of such
Net Proceeds payments shall have the right to audit such payments following
receipt of each payment by giving notice to the remaining Member and by
conducting such audit in accordance with Section 11.6 of the Agreement. Costs of
such an audit shall be borne by the holder of the Net Proceeds interest.

Smelter Returns Calculation

A. Definitions. The following definitions shall apply.

1. "Gold Production" means the quantity of refined gold outturned to The
remaining Member's account by an independent third party refinery for gold
produced from the Properties during the month on either a provisional or final
settlement basis.
 
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2. "Gross Value" shall be determined on a month basis and have the following
meanings with respect to the following Minerals:

a. Gold

(a) If The remaining Member sells gold concentrates, dore or ore, then Gross
Value shall be the value of the gold contained in the gold concentrates, dore
and ore determined by utilizing: (1) the mine weights and assays for such gold
concentrates, dore and ore; (2) a reasonable recovery rate for the refined gold
recoverable from such gold concentrates, dore and ore (which shall be adjusted
annually to reflect the actual recovery rate of refined metal from such gold
concentrates, dore and ore); and (3) the Monthly Average Gold Price for the
month in which the gold concentrates, dore and ore were sold.

(b) If The remaining Member produces refined gold (meeting the specifications of
the London Bullion Market Association, and if the London Bullion Market
Association no longer prescribes specifications, the specifications of such
other association generally accepted and recognized in the mining industry) from
Minerals, and if Section 1.2.1(a) above is not applicable, then for purposes of
determining Gross Value, the refined gold shall be deemed to have been sold at
the Monthly Average Gold Price for the month in which it was refined. The Gross
Value shall be determined by multiplying Gold Production during the month by the
Monthly Average Gold Price.

b. Silver.

(a) If the remaining Member sells silver concentrates, dore or ore, then Gross
Value shall be the value of the silver contained in the silver concentrates,
dore and ore determined by utilizing: (1) the mine weights and assays for such
silver concentrates, dore and ore; (2) a reasonable recovery rate for the
refined silver recoverable from such silver concentrates, dore and ore (which
shall be adjusted annually to reflect the actual recovery rate of refined metal
from such silver concentrates, dore and ore); and (3) the Monthly Average Silver
Price for the month in which the silver concentrates, dore and ore were sold.

(b) If the remaining Member produces refined silver (meeting the specifications
for refined silver subject to the New York Silver Price published by Handy &
Harmon, and if Handy & Harmon no longer publishes such specifications, the
specifications of such other association or entity generally accepted and
recognized in the mining industry) from Minerals, and if Section 1.2.2(a) above
is not applicable, the refined silver shall be deemed to have been sold at the
Monthly Average Silver Price for the month in which it was refined. The Gross
Value shall be determined by multiplying Silver Production during the month by
the Monthly Average Silver Price.

c. All Other Minerals.

(a) If the remaining Member sells any concentrates, dore or ore of Minerals
other than gold or silver, then Gross Value shall be the value of such Minerals
determined by utilizing: (1) the mine weights and assays for such Minerals; (2)
a reasonable recovery rate for the Minerals (which shall be adjusted annually to
reflect the actual recovery rate of recovered or refined metal or product from
such Minerals); and (3) the monthly average price for the Minerals or product of
the Minerals for the month in which the concentrates, dore or ore was sold. The
monthly average price shall be determined by reference to the market for such
Minerals or product which is recognized in the mining industry as authoritative
and reflective of the market for such Minerals or product.
 
28

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(b) If the remaining Member produces refined or processed metals from Minerals
other than refined gold or refined silver, and if Section 1.2.3(a) above is not
applicable, then Gross Value shall be equal to the amount of the proceeds
received by The remaining Member during the month from the sale of such refined
or processed metals. The remaining Member shall have the right to sell such
refined or processed metals to an affiliated party, provided that such sales
shall be considered, solely for purposes of determining Gross Value, to have
been sold at prices and on terms no less favorable than those that would be
obtained from an unaffiliated third party in similar quantities and under
similar circumstances.

3. "Minerals" means gold, silver, platinum, antimony, mercury, copper, lead,
zinc, and all other precious metal mineral elements and precious metal mineral
compounds, and geothermal resources, which are contemplated to exist on the
Properties or which are after the Effective Date discovered on the Properties
and which can be extracted, mined or processed by any method presently known or
developed or invented after the Effective Date.

4. "Monthly Average Gold Price" means the average London Bullion Market
Association Afternoon Gold Fix, calculated by dividing the sum of all such
prices reported for the month by the number of days for which such prices were
reported during that month. If the London Bullion Market Association Afternoon
Gold Fix ceases to be published, all such references shall be replaced with
references to prices of gold for immediate sale in another established marked
selected by the remaining Member, as such prices are published in Metals Week
magazine, and if Metals Week magazine no longer publishes such prices, the
prices of such other association or entity generally accepted and recognized in
the mining industry.

5. "Monthly Average Silver Price" means the average New York Silver Price as
published daily by Handy & Harmon, calculated by dividing the sum of all such
prices reported for the month by the number of days in such month for which such
prices were reported. If the Handy & Harmon quotations cease to be published,
all such references shall be replaced with references to prices of silver for
immediate sale in another established market selected by The remaining Member as
published in Metals Week magazine, and if Metals Week magazine no longer
publishes such prices, the prices of such other association or entity generally
accepted and recognized in the mining industry.

6. "Net Smelter Returns" means the Gross Value of all Minerals, less the
following costs, charges and expenses paid or incurred by the remaining Member
with respect to the refining and smelting of such Minerals:

a. Charges for smelting and refining (including sampling, assaying and penalty
charges), but not any charges or costs of agglomeration, beneficiation,
crushing, extraction, milling, mining or other processing; and

b. Actual costs of transportation (including freight, insurance, security,
transaction taxes, handling, port, demurrage, delay and forwarding expenses
incurred by reason of or in the course of such transportation) of concentrates
or dore metal from the Properties to the smelter or refinery, but not any
charges or costs of transportation of Minerals or ores from any mine on the
Properties to an autoclave, concentrator, crusher, heap or other leach process,
mill or plant which is not a smelter or refinery.

7. "Properties" means the real Properties described in the instrument to which
these Net Smelter Returns provisions are attached and made a part.

8. "Silver Production" means the quantity of refined silver outturned to the
remaining Member's account by an independent third-party refinery for silver
produced from the Properties during the month on either a provisional or final
settlement basis.
 
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C. Payment Procedures.

1. Accrual of Obligation. The remaining Member's obligation to pay the royalty
shall accrue and become due and payable upon the sale or shipment from the
Properties of unrefined metals, dore metal, concentrates, ores or other Minerals
or Minerals products or, if refined metals are produced, upon the outturn of
refined metals meeting the requirements of the specified published price to the
remaining Member's account.

2. Futures or Forward Sales, Etc.. Except as provided in Sections 1.2.1(a),
1.2.2(a) and 1.2.3 (a) (regarding sales of unprocessed gold and silver and sales
of Minerals other than gold and silver), Gross Value shall be determined
irrespective of any actual arrangements for the sale or other disposition of
Minerals by the remaining Member, specifically including but not limited to
forward sales, futures trading or commodities options trading, and any other
price hedging, price protection, and speculative arrangements that may involve
the possible delivery of gold, silver or other metals produced from Minerals.

3. Monthly Calculations and Payments. Net Smelter Returns royalties shall be
determined on a monthly basis. The remaining Member shall pay the remaining
Member each monthly royalty payment on or before the last business day of the
month immediately following the month in which the royalty payment obligation
accrued. The remaining Member acknowledges that late payment by the remaining
Member to Recipient of royalty payments will cause Recipient to incur costs, the
exact amount of which will be difficult to ascertain. Accordingly, if any amount
due and payable by the remaining Member is not received by Recipient within ten
(10) days after such amount is due, then the remaining Member shall pay to
Recipient a late charge equal to ten percent (10%) of such overdue amount.
Recipient’s acceptance of such late charge shall not constitute a waiver of the
remaining Member’ default with respect to such overdue amount, nor prevent
Recipient from exercising any of Recipient’s other rights and remedies. If any
amount payable by the remaining Member remains delinquent for a period in excess
of thirty (30) days, The remaining Member shall pay to Recipient, in addition to
the late payment, interest from and after the due date at the statutory interest
rate.

4. Statements. At the time of payment of the royalty, the remaining Member shall
accompany such payment with a statement which shows in detail the quantities and
grades of refined gold, silver or other metals or dore, concentrates or ores
produced and sold or deemed sold by The remaining Member in the preceding month;
the Monthly Average Gold Price and Monthly Average Silver Price, as applicable;
costs and other deductions, and other pertinent information in detail to explain
the calculation of the payment with respect to such month. Payment shall be made
to the address provided in the agreement or instrument to which this Exhibit is
attached for purposes of notices or by wire transfer to an account which
Recipient designates.

5. Inventories and Stockpiles. The remaining Member shall include in all monthly
statements a description of the quantity and quality of any gold or silver dore
that has been retained as inventory for more than ninety (90) days. Recipient
shall have thirty (30) days after receipt of the statement to either: (a) elect
that the dore be deemed sold, with Gross Value to be determined as provided in
Sections 1.2.1 (b), with respect to gold, and 1.2.2(b), with respect to silver,
as of such thirtieth (30th) day utilizing the mine weights and assays for such
dore and utilizing a reasonable recovery rate for refined metal and reasonable
deemed charges for all deductions which the remaining Member is authorized to
take, or (b) elect to wait until such time as the royalty payment otherwise
would become payable pursuant to Sections 1.2.1(b) and 1.2.2(b). The remaining
Member’s failure to respond within such time shall be deemed to be an election
to use the methods described in Sections 1.2.1(b) and 1.2.2(b).
 
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6. Audit. Upon reasonable notice and at a reasonable time, the Recipient shall
have the right to audit and examine the remaining Member’s accounts and records
relating to the calculation of the Net Smelter Returns royalty payments. If such
audit determines that there has been a deficiency or an excess in the payment
made to Recipient, such deficiency or excess shall be resolved by adjusting the
next monthly royalty payment due Recipient. Recipient shall pay all costs of
such audit unless a deficiency of three percent (3%) or more of the royalty
payment due for the calendar month in question is determined to exist. All books
and records used by the remaining Member to calculate the royalty payments shall
be kept in accordance with generally accepted accounting principles applicable
to the mining industry.

C. Sampling and Commingling.  The remaining Member shall have the right to
commingle Minerals and ores from the Properties and materials from other
properties, provided, that the remaining Member first informs Recipient, in
writing, of the remaining Member’s intention to commingle and delivers to
Recipient a detailed written description of the remaining Member’s commingling
plan. Recipient shall have ninety (90) days during which to review and comment
on the remaining Member’s proposed commingling plan. In any and all events, all
Minerals and ores shall be measured and sampled by the remaining Member in
accordance with sound mining and metallurgical practices for metal and mineral
content before commingling of any such Minerals or ores with materials from any
other Properties. Representative samples of materials from the Properties
intended to be commingled shall be retained by the remaining Member, and assays
of these samples shall be made before commingling to determine the metal content
of each ore. Accurate records shall be kept by Recipient showing measurements,
assays of metal content and gross metal content of the materials from the
Properties are commingled.
 
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Exhibit F
 
Lincoln Hill LLC
Operating Agreement
 
Insurance

The Manager shall, at all times while conducting Operations, comply fully with
the applicable workers’ compensation laws and purchase, or provide protection
for the Company comparable to that provided under standard form insurance
policies for the following risk categories: (1) comprehensive public liability
and property damage with combined limits of not less than One Million Dollars
($1,000,000.00) for bodily injury and property damage during conduct of
Exploration and of not less than Five Million Dollars ($5,000,000.00) for bodily
injury and property damage during Development or Mining; (2) automobile
insurance with combined limits of not less than One Million Dollars
($1,000,000.00) during Exploration and of not less than Five Million Dollars
($5,000,000.00) during Development or Mining; and (3) adequate and reasonable
insurance against risk of fire and other risks ordinarily insured against in
similar operations. If the Manager elects to self-insure, it shall charge to the
Business Account an amount equal to the premium it would have paid had it
secured and maintained a policy or policies of insurance on a competitive bid
basis in the amount of such coverage. Each Member shall self-insure or purchase
for its own account such additional insurance as it deems necessary.
 
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Exhibit G

Lincoln Hill LLC
Operating Agreement
 
LINCOLN HILL PROJECT
Pershing County, Nevada
By: T. Callicrate 4-18-05

 EXPLORATION AND DEVEOLPMENT BUDGET
JULY 1, 2005 thru JUNE 30, 2010.

Exploration Plans and Schedule - The exploration program for the Lincoln Hill
Project has been divided into three-phases which will be conducted over a
five-year period beginning in July 1, 2005 and ending June 1, 2010. The primary
goal of this phased program is to explore and develop an economic gold-silver
deposit and completing a Feasibility Study with a minimum of 150,000-ounce
reserve. This exploration and Development Program is designed to discover and
test several recognized targets through field work and exploration and
development drilling. 

PHASE I - EXPLORATION PROGRAM BUDGET - 2005-2006 YEAR
This phase of exploration activities would consist of general surface and
underground exploration activities including geologic mapping, rock chip and
soil sampling, geophysical surveying, permitting and exploration drilling. The
breakdown for this first phase of the exploration evaluation will occur as
follows:

Phase I-A - Mapping and Sampling Activities - 3rd and 4th Quarter 2005
 
·
Data compilation of all current geological and geochemical data (1 month)
$10,000
·
Surface mapping and sampling by two geologist (1 month)
$20,000
·
Underground mapping and sampling by two geologists. (two weeks)
$10,000
·
Rock chip geochemistry:
 
 
 
·    Surface sampling (200 samples @ 25.00 ea.
$5,000
 
·    Underground sampling (100 samples @ 25.00 ea.)
$2,500
 
·    Re-logging and interpretation of previous drilling
$12,500
 
·    Petrographic studies (25 samples)
$5,000
·
Geophysical Surveys:
     
·    Ground magnetic survey
$15,000
 
·    Gravity survey
$15,000
 
·    Other potential geophysical surveys
$30,000
               
Total
$125,000

 
Phase I-B - Exploration Drilling Activities - 1st and 2nd Quarter 2006
 
·
Permitting and road building
 
$30,000
·
Drilling: 15 RC holes w/ ave. of 1,000 ft. @ $12/ft. 
 
$180,000
·
Assaying of drill footage: 15,000 ft. each 5’ interval (3,000 samples @ $20/ea)
 
$60,000
·
Drilling: 5 core holes w/ ave. of 500 ft. each @ $30/ft.
 
$75,000
 
Assaying of core drill footage: 2,500 ft. each 5’ interval (500 samples @
$20/ea)
  $10,000   Drill supervision and compilation:   $40,000              
                   
Total  $395,000          

 
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Total Budget for the Phase I Exploration Program -Total - $520,000
 
PHASE II - DEVELOPMENT DRILLING ACTIVITIES - 2006 Thru 2009 YEAR
This phase of exploration activities would be contingent upon encouraging drill
results obtained in Phase I. This phase would consist of additional permitting,
reverse circulation drilling, selective core drilling, metallurgical testing,
geotechnical investigations and initiation of scoping and possibly feasibility
studies. The breakdown for this first phase of the exploration evaluation will
occur as follows:

Phase II-A - Exploration and Development Drilling Activities - Year 2006-2007
 
·
Permitting and road building
$30,000
·
Drilling: 25 RC holes w/ ave. of 1,000 ft. @ $12/ft. 
$300,000
·
Assaying of drill footage: 30,000 ft. each 5’ interval (3,000 samples @ $20/ea)
$120,000
·
Drill supervision and data compilation:   $50,000
·
Preliminary metallurgical studies  $20,000
$20,000                
 
Total
$520,000

 
Phase II-B - Development Drilling Activities - Year 2007-2008

 
·
Permitting and road building
$60,000
·
Drilling: 40 RC holes w/ ave. of 1,000 ft. @ $12/ft.
$480,000
·
Assaying of drill footage: 40,000 ft. each 5’ interval (3,000 samples @ $20/ea)
$160,000
·
Drilling: 5 core holes w/ ave. of 1,000 ft. each @ $30/ft.
$150,000
·
Assaying of core drill footage: 5,000 ft. each 5’ interval (1,000 samples @
$20/ea)  
$20,000
·
Drill supervision and data compilation:    
  $75,000
·
Metallurgical studies 
  $20,000
·
Geotechnical studies   $20,000                                         
Total
$985,000

 
Phase II-C- Development Drilling Activities - Year 2008-2009
 
 
·
Permitting and road building
$50,000
·
Drilling: 20 RC holes w/ ave. of 1,000 ft. @ $10/ft.
$200,000
·
Assaying of drill footage: 20,000 ft. each 5’ foot interval (4,000 samples @
$20/ea)  
$80,000
·
Drilling: 15 core holes w/ ave. of 1,000 ft. @ $30/ft.    
$450,000
·
Assaying of core drill footage: 15,000 ft. each 5’ interval (3,000 samples @
$20/ea)  
$60,000
·
Drill supervision and data compilation 
$60,000
·
Metallurgical studies 
$50,000
·
Geotechnical studies   $25,000                                       
Total
$975,000               Total Budget for Phase II Exploration Program    
Total - $2,480,000
   

 
 
 
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PHASE III - FEASIBILITY STUDIES - 2009-2010 YEAR

This phase of development activities including additional drilling and
completing a feasibility study would be contingent upon encouraging drill
results obtained in Phase I and II.

Phase III-A Development Drilling Activities - Year 2009 -2010
 

 ·   Additional development RC and core drilling    $250,000

 

Phase III-B Feasibility Study- Year 2009-2010 

 

 ·
 Feasibility Study (including additional metallurgic and geotechnical studies,
scoping-pre-feasibility studies, cross-sections of ore polygons and mine
modeling.  
  $750,000                     Total Budget for Phase III Development and
feasdibility Studies   Total - $1,000,000                                

 
SUMMARY OF BUDGET EXPENDITURES

Total Budget for the Phase I Exploration Program (Year 2005-2006) -Total -
$520,000
Total Budget for the Phase II Exploration and Development Program (Year 2006
thru 2009) -Total - $2,480,000
Total Budget for the Phase III Development and Feasibility Program (Year
2009-2010) -Total - $1,000,000

Total Budget for all 3 Phases - Total $4,000,000

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Exhibit H

Lincoln Hill LLC
Operating Agreement

Preemptive Rights

 
1. Preemptive Rights. If a Member intends to Transfer all or any part of its
Ownership Interest, or an Affiliate of a Member intends to Transfer Control of
such Member (“Transferring Entity”), such Member shall promptly notify each
other Member of such intentions. The notice shall state the price and all other
pertinent terms and conditions of the intended Transfer, and shall be
accompanied by a copy of the offer or the contract for sale. If the
consideration for the intended transfer is, in whole or in part, other than
monetary, the notice shall describe such consideration and its monetary
equivalent (based upon the fair market value of the nonmonetary consideration
and stated in terms of cash or currency). The other Member or Members, as
applicable, shall have thirty (30) days from the date such notice is delivered
to notify the Transferring Entity (and the Member if its Affiliate is the
Transferring Entity) whether it elects to acquire the offered interest at the
same price (or its monetary equivalent in cash or currency) and on the same
terms and conditions as stated in the notice. If there are more than two (2)
Members, the non-Transferring Entity Members shall have the right to acquire the
offered interest pro rata, and if a non-Transferring Entity Member elects not to
acquire its proportionate share of the offered interest, the other
non-Transferring Entity Members shall have the right to do so. If the
non-Transferring Entity Members elect to acquire the offered interest, their
acquisition of the offered interest shall be consummated promptly.

1.1 If the non-Transferring Entity Member or Members, as applicable, fail to so
elect within the period provided for above, the Transferring Entity shall have
one hundred twenty (120) days following the expiration of such period to
consummate the Transfer to a third party at a price and on terms no less
favorable to the Transferring Entity than those offered by the Transferring
Entity to the non-Transferring Entity Member or Members, as applicable, in the
aforementioned notice.

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

2. Exceptions to Preemptive Right. Section 1.1 above shall not apply to the
following:

2.1 Transfer by a Member of all or any part of its Ownership Interest to an
Affiliate;

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

2.4 The transfer of Control of a Member by an Affiliate to such Member or to
another Affiliate;

2.5 Subject to Subsection 7.2.7 of the Agreement, the grant by a Member of a
security interest in its Ownership Interest by Encumbrance;
 
2.6 The creation by any Affiliate of a Member of an Encumbrance affecting its
Control of such Member; or

2.7 A transfer by an Affiliate of a Member of Control of such Member to a third
party, provided the value of such Member’s Capital Account balance does not
exceed fifty percent (50%) of the Net Worth of the transferring Affiliate, or
does not exceed fifty percent (50%) of the Net Worth of Transferee.

The term “Net Worth” shall mean the remainder after total liabilities are
deducted from total assets. In the case of a corporation, Net Worth includes
both capital stock and surplus. In the case of a limited liability company, Net
Worth includes member contributions. In the case of a partnership or sole
proprietorship, Net Worth includes the original investment plus accumulated and
re-invested profits.

36

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