SHARE EXCHANGE AGREEMENT

 

dated as of

 

November 9, 2002

 

by and between

 

P. LEE HALAVAIS
(SELLER)

 

and

 

ROYAL GOLD, INC.
(BUYER)

TABLE OF CONTENTS

 

Page

ARTICLE I

DEFINITIONS.................................................................................

1

1.1

Specific
Definitions...........................................................................

1

ARTICLE II

SALE AND TRANSFER OF SHARES; CLOSING....................

4

2.1

Shares.................................................................................................

4

2.2

Closing...............................................................................................

4

2.3

Closing
Obligations...........................................................................

4

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDER............................................................................

5

3.1

Ownership of
Stock...........................................................................

5

3.2

Authorization,
etc..............................................................................

6

3.3

No Approvals or
Conflicts.................................................................

6

3.4

Litigation...........................................................................................

6

3.5

Relationships with High
Desert.........................................................

6

3.6

Subsidiaries........................................................................................

7

3.7

Title to
Assets....................................................................................

7

3.8

Liabilities...........................................................................................

7

3.9

Agreements........................................................................................

7

3.10

Brokers' or Other
Fees.......................................................................

8

3.11

Employee Benefit
Plans.....................................................................

8

3.12

Disclosure..........................................................................................

8

3.13

Residency...........................................................................................

8

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER........

8

4.1

Authorization,
etc..............................................................................

8

4.2

No Approvals or
Conflicts.................................................................

9

4.3

Litigation...........................................................................................

9

4.4

No Brokers' or Other
Fees.................................................................

9

4.5

Royal Gold Financial
Statements......................................................

9

4.6

Capitalization.....................................................................................

9

4.7

Shares To Be
Issued..........................................................................

10

4.8

Charter and
Bylaws...........................................................................

10

4.9

Disclosure..........................................................................................

10

4.10

Residency...........................................................................................

10

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TABLE OF CONTENTS

 

Page

ARTICLE V

COVENANTS AND AGREEMENTS...........................................

10

5.1

Additional
Agreements......................................................................

10

5.2

Governmental
Filings........................................................................

10

5.3

Prospectus
Supplement......................................................................

10

5.4

Access to Books and
Records............................................................

11

5.5

Confidentiality...................................................................................

11

5.6

Merger Following Share
Exchange...................................................

12

5.7

Conduct of Business After Execution of Agreement........................

13

5.8

Obligations Under Billson/Houghton Settlement Agreement...........

13

5.9

Sale of Shares Following the
Closing................................................

13

ARTICLE VI

CONDITIONS.................................................................................

13

6.1

Conditions to the Obligations of Each Party.....................................

13

6.2

Conditions to the Obligations of
Buyer.............................................

14

6.3

Conditions to the Obligations of Stockholder...................................

15

ARTICLE VII

 

INDEMNIFICATION OF BUYER AND THE
STOCKHOLDER............................................................................

15

7.1

Indemnification of
Buyer...................................................................

15

7.2

Indemnification of the
Stockholder...................................................

16

7.3

Indemnification of
Director...............................................................

17

7.4

Cooperation.......................................................................................

17

ARTICLE VIII

TERMINATION..............................................................................

19

8.1

Termination.......................................................................................

19

8.2

Effect of
Termination........................................................................

19

ARTICLE IX

MISCELLANEOUS........................................................................

19

9.1

Fees and
Expenses.............................................................................

19

9.2

Governing
Law..................................................................................

19

9.3

Amendment.......................................................................................

19

9.4

Successors and Assigns;
Assignment................................................

20

9.5

Waiver...............................................................................................

20

9.6

Survival of Representations and Warranties.....................................

20

9.7

Notices...............................................................................................

20

9.8

Interpretation.....................................................................................

21

9.9

Complete
Agreement.........................................................................

21

- ii -

TABLE OF CONTENTS

 

Page

9.10

Counterparts.......................................................................................

21

9.11

Headings............................................................................................

21

9.12

Severability........................................................................................

21

9.13

Third
Parties......................................................................................

22

9.14

Resolution of
Disputes.......................................................................

22

9.15

Further
Assurances............................................................................

23

9.16

Submission to Jurisdiction;
Waivers.................................................

23

- iii -

SHARE EXCHANGE AGREEMENT

 

     

THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated as of November 9, 2002,
is by and between Royal Gold, Inc., a Delaware corporation ("Buyer"), and P. Lee
Halavais (the "Stockholder").  

RECITALS

 

     

WHEREAS, Stockholder is the owner (or at the Closing referred to in Section 2.2
will be the owner) of 49,371,193 shares (the "Shares") of High Desert Mineral
Resources, Inc., a Delaware corporation ("High Desert"), comprising 93.3 % of
the issued and outstanding shares of High Desert, $.001 par value per share (the
"Common Stock");  

     

WHEREAS Stockholder is also an officer and a director of High Desert; and  

     

WHEREAS, Buyer desires to purchase, and Stockholder desires to sell, all of the
Shares on the terms described herein.  

     

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:  

ARTICLE I

DEFINITIONS

 

     

1.1   Specific Definitions. As used in this Agreement, the following terms shall
have the meanings set forth or as referenced below:  

     

"Barrick Royalty" means that 1% Net Smelter Returns Royalty described in that
Royalty Assignment, Confirmation, Amendment and Restatement of Royalty Agreement
among Barrick Bullfrog Inc., Barrick Goldstrike Mines Inc. and Royal Hal Co. (to
whom High Desert is a successor-in-interest by merger) dated as of November 30,
1995.  

     

"Billson/Houghton Settlement Agreement" shall have the meaning set forth in the
definition of Stockholder Agreement below.  

     

"Books and Records" shall mean all books and records (including computerized
books and records) related to High Desert, the High Desert Merger Subsidiaries
and the Subsidiaries and their respective assets, including all contracts, title
and environmental information, stock ledgers, minute books, books, records
(including Tax Returns and other Tax related information), documents,
communications, items and matters (including computer programs and data).  

     

"Buyer Indemnitees" shall have the meaning set forth in Section 7.1.  

     

"Closing" shall have the meaning set forth in Section 2.2.  

     

"Closing Date" shall have the meaning set forth in Section 2.2.

- 1 -

 

     

"Code" shall mean the Internal Revenue Code of 1986, as amended.  

     

"Common Stock" shall have the meaning set forth in the Recitals.  

     

"Confidentiality Agreement" shall mean the Confidentiality Agreement, effective
September 17, 2002, by and between Stockholder and Buyer.  

     

"Equity Interests" shall mean phantom stock plans, stock appreciation rights,
rights of first refusal, options, warrants, calls, pre-emptive rights,
subscriptions or other rights, convertible securities, or agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of High Desert.  

     

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.  

     

"Exploration Agreements" shall mean those exploration agreements, option
agreements, joint venture agreements and other agreements to which High Desert
or any of its Subsidiaries is a party and under which any of them has or may
have obligations to make payments to third parties or incur expenditures with
respect to exploration, development or mining activities.  

     

"Governmental Entity" shall mean any court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory authority or
agency of the United States or Canada or any state, province, county,
municipality or other political subdivision thereof.  

     

"High Desert" shall have the meaning set forth in the Recitals.  

     

"High Desert Financial Statements" shall mean the audited financial statements
of High Desert as of and for the years ended December 31, 1998, 1999, 2000,
2001, and the unaudited financial statements of High Desert as of and for the
quarter ended June 30, 2002.  

     

"High Desert Merger Subsidiaries" shall mean Royal Hal Co., formerly a Delaware
corporation, SLH Co., formerly a Delaware corporation, and Gold Trend
Development, Inc., formerly a Delaware corporation, each of which was merged
into High Desert effective September 16, 1997.  

     

"Indemnifiable Costs" shall have the meaning set forth in Section 7.1.  

     

"Liens" means any mortgage, pledge, security interest, encumbrance, lien, charge
or restriction of any kind whatsoever.  

     

"Maximum Liability Amount" shall have the meaning set forth in Section 7.1.  

     

"Merger" shall have the meaning set forth in Section 5.6.  

     

"Merger Sub" shall have the meaning set forth in Section 5.6.  

     

"Newmont Royalty" means the interest owned by High Desert as defined in that
Carried Interest and Operating Agreement between Newmont Gold Company and High
Desert dated as of May 3, 1999.

- 2 -

     

"Person" shall mean any corporation, partnership, person, trust, foundation or
any other entity or group.  

     

"Properties" shall mean (a) all of the patented and unpatented mining claims and
millsites, and all of the fee surface and minerals owned by High Desert or any
of its Subsidiaries, or any interest therein held by High Desert or any of its
Subsidiaries pursuant to the Exploration Agreements, including all easements,
rights-of-way, water rights and other rights appurtenant thereto, and (b) High
Desert's interest in the Newmont Royalty, the Barrick Royalty, and any other
royalty interests owned by High Desert.  

     

"Purchase Price" shall have the meaning set forth in Section 2.1.  

     

"Royal Gold Financial Statements" shall mean the financial statements of Buyer
as of and for the fiscal years ending June 30, 1998, 1999, 2000, 2001 and 2002.
 

     

"Royal Gold Stock" shall have the meaning set forth in Section 2.1.  

     

"Royalties" means the Barrick Royalty and the Newmont Royalty.  

     

"Securities Act" means the Securities Act of 1933, as amended.  

     

"Share Exchange" shall have the meaning set forth in Section 5.6(b).  

     

"Share Exchange/Merger" shall have the meaning set forth in Section 5.6(b).  

     

"Shares" shall have the meaning set forth in the Recitals.  

     

"Stockholder Agreement" shall mean any lease, license, contract, agreement or
other instrument or obligation providing for payments to or by the Stockholder
to which the Stockholder is a party or by which the Stockholder or any of her
properties or assets (including the Shares) is bound or affected, including,
without limitation, that Confidential Settlement Agreement and Mutual Release
dated effective April 25, 2001 among the Stockholder and the Billson/Houghton
Parties, as amended (the "Billson/Houghton Settlement Agreement").  

     

"Stockholder Indemnitees" shall have the meaning set forth in Section 7.2.  

     

"Subsidiaries" means the following wholly-owned subsidiaries of High Desert:
Gold Ventures, Inc., a Nevada corporation, High Desert Geological Services,
Inc., a Nevada corporation, and DFH Co. of Nevada, a Nevada corporation.  

     

"Tax Return" shall mean any return, report, document, declaration or other
information or filing (including any related or supporting information) filed or
required to be filed with any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes.  

     

"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, Nevada net proceeds, withholding, employment,
social security, Medicare, occupation, use, service, service use, license, net
worth, payroll, franchise, transfer and recording taxes, fees and

- 3 -

charges, imposed by the Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such terms shall include any interest whether
paid or received, fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.

 

     

"TSX-V" shall have the meaning set forth in Section 5.2.  

ARTICLE II

SALE AND TRANSFER OF SHARES; CLOSING

 

           

(a)   Shares. Subject to the terms and conditions of this Agreement, and in
particular the provisions of Section 8.1, at the Closing, Stockholder shall
transfer the Shares to Buyer, and, in exchange therefor, Buyer shall transfer to
the Stockholder 1,412,229 shares of Buyer's common stock, $.01 par value per
share (the "Royal Gold Stock"), and $200,000 in cash. The aggregate purchase
price for the Shares shall be $24,391,489 (the "Purchase Price"), determined as
provided in this Section. For purposes of this Section, the Royal Gold Stock
transferred to Stockholder shall be valued at $17.13 per share.  

     

2.2   Closing. The purchase and sale of the Shares (the "Closing") provided for
in this Agreement will take place at the offices of Davis Graham & Stubbs LLP,
1550 Seventeenth Street, Suite 500, Denver, Colorado 80202, on November 15,
2002, or at such other time and place as the parties may agree (the "Closing
Date").  

     

2.3   Closing Obligations. At the Closing:  

           

(a)   The Stockholder will deliver to Buyer:  

                 

(i)   certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers) for transfer to Buyer;  

                 

(ii)   a certificate executed by the Stockholder stating that each of the
representations and warranties of the Stockholder in this Agreement is accurate
in all material respects as of the Closing Date;  

                 

(iii)   an affidavit of non-foreign status and no requirement for withholding
under Section 1445 of the Code; and  

                 

(iv)   a proxy allowing Buyer to vote her Shares with respect to any matters
that call for a vote of High Desert shareholders as of a record date prior to
the Closing Date.  

           

(b)   Buyer will deliver to the Stockholder:  

                 

(i)   the cash portion, if any, of the Purchase Price, by wire transfer of
immediately available funds;

- 4 -

                 

(ii)   one or more stock certificates registered in the name of the Stockholder
for the Royal Gold Stock, which will be duly registered and freely tradable,
accompanied by a prospectus supplement;  

                 

(iii)   a certificate executed by Buyer to the effect that each of Buyer's
representations and warranties in this Agreement is accurate in all material
respects as of the Closing Date;  

                 

(iv)   an opinion of counsel for Buyer in the form of Exhibit A attached hereto
and incorporated herein by reference; and  

                 

(v)   a letter from Buyer's stock transfer agent confirming that upon receipt of
an opinion in the form of Exhibit C (if required) it will transfer any or all of
the Royal Gold Stock.  

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

 

     

Stockholder hereby represents and warrants to Buyer as follows:  

     

3.1   Ownership of Stock. The Shares are owned by the Stockholder free and clear
of all liens, claims, charges or encumbrances (including direct or indirect
collateralization agreements), and represent the entire and beneficial ownership
interest of Stockholder in High Desert. Upon the consummation of the
transactions contemplated hereby, Buyer will acquire good and marketable title
to such Shares free and clear of all Liens. There are no statutory or
contractual preemptive rights or rights of first refusal with respect to the
sale of the Shares hereunder. The Stockholder has not violated any U.S. or
Canadian federal, state or provincial securities laws in connection with the
offer and sale of the Shares, and the offer and sale of the Shares hereunder do
not require registration under any applicable U.S. or Canadian securities laws.
Except as set forth on Schedule 3.1, there are no agreements between Stockholder
and any other Person, including any High Desert stockholder, with respect to the
voting or transfer of High Desert's capital stock or with respect to any other
aspect of High Desert's affairs. Except for the transactions contemplated by
this Agreement, there are no outstanding Equity Interests obligating Stockholder
to transfer or sell or cause to be transferred or sold any present or future
interest in any shares of capital stock of, or other equity interest in, High
Desert, or securities convertible into or exchangeable for such shares or equity
interests, or obligations of Stockholder to grant, extend or enter into any
option, warrant, call, subscription or other right, or convertible security, or
agreement, arrangement or commitment for any Equity Interests. The Stockholder
has no outstanding contractual obligations to repurchase, redeem or otherwise
acquire any shares of the capital stock or other Equity Interests of High
Desert.  

     

3.2   Authorization, etc. The Stockholder has the requisite power and authority
to execute and deliver this Agreement and the documents and instruments
contemplated hereby and to carry out the transactions contemplated hereby. This
Agreement constitutes a valid and binding agreement of the Stockholder,
enforceable against the Stockholder in accordance with its terms, except that
(i) the enforceability hereof may be limited by bankruptcy, insolvency,

- 5 -

reorganization, moratorium, fraudulent transfer or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. The Stockholder does not have knowledge
of any facts or circumstances currently existing which would give rise to such
equitable defenses.

 

     

3.3   No Approvals or Conflicts. Neither the execution, delivery or performance
of this Agreement by the Stockholder nor the consummation by the Stockholder of
the transactions contemplated hereby or thereby nor compliance by the
Stockholder with any of the provisions hereof or thereof will (a) except as set
forth on Schedule 3.3, require the Stockholder to make any filing with, or
obtain any permit, authorization, consent or approval of, any Governmental
Entity or any other Person, (b) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration) under
any of the terms, conditions or provisions of any Stockholder Agreement or
result in the creation of any lien upon the Stockholder's capital stock or
assets or (c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Stockholder or any of her properties or assets.  

     

3.4   Litigation. Except as set forth in Schedule 3.4, there are no claims,
actions, proceedings or investigations pending or, to the Stockholder's actual
knowledge, threatened before any court or governmental regulatory authority or
body (a) against or involving the Stockholder in her capacity as a stockholder,
officer or director of High Desert or any of its Subsidiaries or the High Desert
Merger Subsidiaries, or (b) which could have a material adverse effect on the
Stockholder or her ability to consummate the transactions contemplated hereby.  

     

3.5   Relationships with High Desert.  

           

(a)   Schedule 3.5(a) sets forth (i) all dividends or other distributions
payable in cash, stock or property received by the Stockholder from High Desert
with respect to her capital stock between January 1, 1998 and the date hereof,
including all stock, stock options, warrants and securities convertible into or
exchangeable for Equity Interests, and the consideration paid in respect of such
issuances during such period, (ii) all other Equity Interests or rights of any
kind to acquire any shares of capital stock of any class of High Desert held by
the Stockholder, (iii) all sales of Common Stock or other Equity Interests from
the Stockholder to High Desert during such period, and the consideration paid in
connection with such redemption or repurchase; (iv) all compensation paid by
High Desert to the Stockholder under any employment, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement during such period; and (v) all employment or severance
agreements between Stockholder and High Desert.  

           

(b)   Schedule 3.5(b) sets forth all contractual arrangements between High
Desert and the Stockholder between January 1, 1998 and the date hereof,
including all contracts for the transfer, lease, license, purchase, sale,
mortgage, pledge, disposal, or encumbrance of any material properties, or assets
and the consideration paid therefor. Stockholder is not in default

- 6 -

under any such contract, and the Stockholder is not aware of any default by High
Desert in respect of any such contract

 

           

(c)   Schedule 3.5(c) sets forth a description of any material insurance policy
maintained by High Desert on the life or for the benefit of the Stockholder
naming High Desert or the Stockholder as a beneficiary or a loss payable payee.
 

     

3.6   Subsidiaries. Each of the High Desert Merger Subsidiaries was merged into
High Desert effective September 16, 1997, pursuant to the terms of the Agreement
and Plan of Merger (as amended) described on Schedule 3.6. There were no other
agreements related to that merger other than as described on Schedule 3.6.
Pursuant to that merger, High Desert became the owner of all of the properties
and assets, including the Royalties, of the High Desert Merger Subsidiaries.  

     

3.7   Title to Assets. No third party has made any assertion to Stockholder that
High Desert owns anything other than good title to the Royalties, free and clear
of all Liens or other claims of third parties. Stockholder has not pledged,
conveyed or otherwise assigned (or agreed to pledge, convey or otherwise assign
or to cause High Desert or any of its Subsidiaries to pledge, convey or
otherwise assign) any interest in either the Newmont Royalty or Barrick Royalty
to any third party. With respect to the unpatented mining claims and millsites
and fee surface and minerals comprising a portion of the Properties, Stockholder
represents and warrants that she has not pledged, conveyed or otherwise assigned
(or agreed to pledge, convey or otherwise assign or to cause High Desert or any
of its Subsidiaries to pledge, convey or otherwise assign) any interest in the
Properties to any third party, except as provided in the Billson/Houghton
Settlement Agreement.  

     

3.8   Liabilities. High Desert does not have any obligation or liability to the
Stockholder, and the Stockholder does not have any obligation or liability to
High Desert (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, other than liabilities and
obligations disclosed in Schedule 3.8.  

     

3.9   Agreements. The Billson/Houghton Settlement Agreement is the only
agreement pursuant to which (a) Stockholder has granted to any third party any
royalty, net profits or net proceeds interest, production payment or other
burden on production affecting the Properties, (b) Stockholder has granted or
agreed to cause High Desert or any of its Subsidiaries to grant to any third
party the right to acquire any such royalty, net profits or net proceeds
interest, production payment or other burden or production, or (c) Stockholder
has agreed or agreed to cause High Desert or any of its Subsidiaries to sell,
transfer, assign, pledge or otherwise hypothecate any Equity Interests or any
interest in any of the Exploration Agreements or the Properties covered thereby.
The Stockholder has performed all of her material obligations under the
Billson/Houghton Settlement Agreement and is not in default under any of the
material terms and conditions of the Billson/Houghton Settlement Agreement.
There are no payments of cash that would be owed to the Billson/Houghton Parties
under Section 4(c)(ii) of the Billson/Houghton Settlement Agreement, and during
the period between the effective date of the Billson/Houghton Settlement
Agreement and the Closing, the only consideration received by Stockholder or
High Desert or any of its Subsidiaries in connection with the sale of any
Specified

- 7 -

Property (as defined in the Billson/Houghton Settlement Agreement) was in the
form of royalty interests.

 

     

3.10   Brokers' or Other Fees. No broker, finder or investment banker is
entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.  

     

3.11   Employee Benefit Plans. Except as set forth on Schedule 3.11, the
Stockholder is not a beneficiary under any pension, profit-sharing, option,
medical, life, health or other employee benefit plan of High Desert.  

     

3.12   Disclosure. None of the statements, representations or warranties made by
the Stockholder in this Agreement or in any schedule or certificate delivered
pursuant to this Agreement contains any untrue statement of material fact or
omits to state any material fact necessary to be stated in order to make the
statements, representations or warranties contained herein or therein not
misleading.  

     

3.13   Residency. Stockholder is a resident of the United States for U.S.
federal income tax purposes.  

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

 

     

Buyer hereby represents and warrants to the Stockholder as follows:  

     4

.1   Authorization, etc.  

           

(a)   Buyer has full corporate power and authority to execute and deliver this
Agreement and the documents and instruments contemplated hereby, and to carry
out the transactions contemplated hereby. This Agreement constitutes a valid and
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. Buyer does not have
knowledge of any facts or circumstances currently existing which would give rise
to such equitable defenses.  

           

(b)   The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the board of
directors of Buyer, and no other corporate proceedings are necessary to
authorize this Agreement and the transactions contemplated hereby.  

     4

.2   No Approvals or Conflicts. Neither the execution, delivery or performance
of this Agreement nor the consummation by Buyer of the transactions contemplated
hereby nor compliance by Buyer with any of the provisions hereof will (a) except
as set forth on Schedule 4.2, require any filing with, or permit, authorization,
consent or approval of, any

- 8 -

Governmental Entity or any other Person, (b) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease,
license, contract, agreement or other instrument or obligation to which Buyer is
a party or by which Buyer or any of its properties or assets may be bound or
(c) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer or any of its properties or assets.

 

     4

.3   Litigation. There are no claims, actions, proceedings or investigations
pending or, to the knowledge of Buyer, threatened against Buyer before any court
or governmental or regulatory authority or body which could have a material
adverse effect on Buyer or on Buyer's ability to consummate the transactions
contemplated hereby.  

     4

.4   No Brokers' or Other Fees. No broker, finder or investment banker is
entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Buyer.  

     4

.5   Royal Gold Financial Statements.  

           

(a)   The Royal Gold Financial Statements attached hereto as Schedule 4.5(a) are
true, correct, complete and accurate in all material respects and present fairly
the financial position and results of operations of Buyer, as at the dates and
for the periods indicated, in accordance with U.S. generally accepted accounting
principles consistently applied, and have been prepared in all material respects
in compliance with Regulation S-X promulgated under the Securities Act.  

           

(b)   Except as set forth on Schedule 4.5(b), since June 30, 2002 (i) there has
been no material adverse change in the results of operations or financial
condition of Buyer, (ii) there has been no change in the capitalization of
Buyer, (iii) Buyer has not disposed of any material amount of assets, and
(iv) Buyer has conducted its business only in the ordinary course, consistent
with the manner in which such business was conducted prior to that date.  

     4

.6   Capitalization. The authorized capitalization of Buyer consists of
50,000,000 shares, consisting of 40,000,000 shares of common stock and
10,000,000 shares of preferred stock, $.01 par value per share, of which 500,000
shares of preferred stock are designated "Series A Junior Participating
Preferred Stock." As of October 24, 2002, there were 19,057,608 issued and
outstanding shares of Royal Gold Stock and no issued and outstanding shares of
preferred stock. All of the outstanding shares of Royal Gold Stock are fully
paid and non-assessable and were not issued in violation of, or subject to, any
preemptive rights.  

     4

.7   Shares To Be Issued. The shares of Royal Gold Stock to be issued to
Stockholder pursuant to this Agreement have been duly authorized and when issued
in accordance with this Agreement will be duly and validly issued shares of
Buyer, fully paid and non-assessable. The shares of Royal Gold Stock, upon
issuance, will be duly registered and freely tradable in the public market,
subject to no restrictions on transfer under the Securities Act.

- 9 -

     4

.8   Charter and Bylaws. The copy of Buyer's certificate of incorporation and
bylaws attached hereto as Schedule 4.8 are complete and accurate as of the date
of this Agreement.  

     4

.9   Disclosure. No representations or warranties by Buyer in this Agreement and
no statement contained in the Form 10-K for the year ended June 30, 2002 filed
by Buyer pursuant to the Exchange Act or in Registration Statement No. 333-3705,
declared effective by the Securities and Exchange Commission on August 9, 1996,
as amended by a prospectus supplement describing this Agreement and the
transactions contemplated hereunder (including, without limitation, documents
incorporated by reference in the Registration Statement), or in any certificate
furnished or to be furnished by Buyer pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, contain or will contain
any untrue statement of a material fact or omit or will omit to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.  

     4

.10  Residency. Buyer is a domestic United States corporation.  

ARTICLE V

COVENANTS AND AGREEMENTS

 

     

5.1   Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable, whether under applicable laws and regulations or
otherwise, or to remove any injunctions or other impediments or delays, legal or
otherwise, to make effective the transactions contemplated by this Agreement. In
case at any time after the Closing any further action is necessary or desirable
to carry out the purposes of this Agreement, Stockholder and the proper officers
and directors of Buyer shall use their reasonable efforts to take, or cause to
be taken, all such necessary actions.  

     

5.2   Governmental Filings. The Stockholder shall file with all Governmental
Entities in the U.S. or Canada, including, if required, the TSX Venture Exchange
("TSX-V"), all documentation as shall be required to be filed by the Stockholder
in order to obtain any necessary approvals for the transfer of the Shares
contemplated hereunder. Buyer shall cooperate in responding to any inquiries
from TSX-V in order to obtain such approvals.  

     

5.3   Prospectus Supplement. As soon as practicable following the date hereof,
Buyer shall prepare a prospectus supplement or post-effective amendment to
Registration Statement No. 333-3705 describing the transactions contemplated by
this Agreement, including, to the extent required, pro forma financial
statements showing the combined results of Buyer and High Desert. Buyer shall
respond to, and the Stockholder shall use her reasonable efforts to assist High
Desert in responding to, any inquiries from the Securities and Exchange
Commission, and Buyer shall take all action required in order to ensure that the
Royal Gold Stock, when delivered to the Stockholder at the Closing, will be
freely tradeable without restriction under the Securities Act.

- 10 -

     

5.4   Access to Books and Records. From and after the date hereof until the
Closing, the Stockholder shall use her reasonable efforts, and her position as
an officer and director of High Desert, to afford to Buyer and Buyer's
accountants, counsel and other designated representatives reasonable access and
duplicating rights during normal business hours to all Books and Records within
High Desert's or the Stockholder's possession or control, and shall use her
reasonable efforts to cause persons or firms possessing relevant items or
information to give similar access. Items or information may be requested under
this Section 5.4 only for a legitimate business purpose including, without
limitation, audit, accounting, claims, due diligence, actions, proceedings,
investigations, litigation and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations, but not for competitive
purposes.  

     

5.5   Confidentiality.  

           

(a)   Prior to and through the Closing Date:  

                 

(i)   Buyer agrees to treat all data, reports, records and other information
developed or made available to it by the Stockholder under this Agreement and
applicable to High Desert or the Stockholder as confidential in accordance with
and subject to the terms of the Confidentiality Agreement, which the parties
hereby agree shall terminate on the Closing Date (notwithstanding any language
to the contrary in the Confidentiality Agreement).  

                 

(ii)  The Stockholder agrees to treat all data, reports, records and other
information developed or made available to her by Buyer under this Agreement and
applicable to Buyer as confidential, and unless she is required by any law,
rule, regulation, or order to disclose any of such information, information
shall not be disclosed to any person (other than attorneys, accountants and
consultants assisting with the transactions contemplated by this Agreement)
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld. In the event such consent is granted, the third party
receiving or reviewing such information shall be required by the Stockholder to
execute a written confidentiality agreement acceptable in form and substance to
the other party prior to such disclosure.  

                 

(iii)  Disclosure of information relating to this Agreement or High Desert may
be made by (x) the Stockholder to High Desert and (y) either party if such
information is required to be disclosed to any federal, state or local
government or appropriate agencies and departments thereof or if such
information is required by law, stock exchange rule or regulation to be publicly
announced. Otherwise, public announcements or reports by either party of
information relating to this Agreement or High Desert shall be made only on the
basis of agreed texts upon the prior written consent of the other party, which
consent shall not be unreasonably withheld. Each of the parties agree that it
will, not less than forty-eight hours in advance of making public any
information referred to in the preceding sentences, give the other party written
notice of the text of the proposed report and provide that party with the
opportunity to object to the form and content thereof before the same is issued.
The party receiving the notice shall respond within forty-eight hours of receipt
of such notice, or its silence will constitute a waiver of objection to the
terms of the proposed text.  

           

(b)   Upon Closing and thereafter, the Stockholder agrees that she will not
disclose, and will cause her agents not to disclose to any Person any
information concerning

- 11 -

High Desert or this Agreement, unless such disclosure is required by any
applicable law, rule or regulation or in connection with the enforcement of her
rights under this Agreement.

 

     

5.6   Merger Following Share Exchange.  

           

(a)   Subsequent to the Closing, whether Buyer has purchased the Shares pursuant
to a Share Exchange (as defined in Section 5.6(b) (below)) or otherwise, as soon
as practicable following the Closing, Buyer shall offer to acquire the remaining
outstanding shares of stock of High Desert, by way of the Merger described in
Section 5.6(b) or otherwise. Buyer's offer shall be for consideration that is at
least equal in value to the consideration received by the Stockholder for the
Shares  

           

(b)   If the allocation of the Purchase Price pursuant to Section 2.1 or Section
8.1(c) results in the Stockholder receiving Royal Gold Stock having a fair
market value equal to 87% or more of the Purchase Price valuing the Royal Gold
Stock component thereof at fair market value (referred to hereinafter as the
"Share Exchange"), then as soon as practicable following the Closing, Buyer
shall use its reasonable best efforts to cause a special purpose subsidiary of
Buyer organized solely to effectuate the transaction described in this
Section 5.6(b) ("Merger Sub") to merge with and into High Desert (the "Merger"),
on terms such that (i) High Desert will survive the Merger and (ii) to the
extent it is within the control of Buyer, the Share Exchange and Merger,
considered together as a single, integrated transaction (the "Share
Exchange/Merger"), will qualify as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code. Upon the request of either party at the
Closing, Buyer and the Stockholder agree to execute such tax representations as
are set forth on Exhibits B-1 and B-2 attached hereto and incorporated herein by
reference; provided that if the Purchase Price includes cash, the form of such
representations shall be appropriately modified as reasonably agreed by the
Stockholder and Buyer. For purposes of this Section 5.6(b), any failure of the
Share Exchange/Merger to qualify as a reorganization within the meaning of
Section 368(a)(2)(E) will be within the control of the Buyer if such failure
results from an act or omission of Buyer other than any act or omission
contemplated by this Agreement or any other agreement between Stockholder and
Buyer, provided that Buyer shall not be liable for any failure of the Share
Exchange/Merger to qualify as a reorganization as a result of the nature of the
historical business activities of Buyer or High Desert or its Subsidiaries.  

           

(c)   In connection with the Share Exchange/Merger, the Stockholder represents
that (i) to Stockholder's knowledge, Merger Sub will acquire at least 90% of the
fair market value of the net assets and at least 70% of the fair market value of
the gross assets held by High Desert immediately prior to the Share
Exchange/Merger and (ii) the Stockholder is not aware of any circumstance that
would cause the Share Exchange/Merger to fail to qualify as a reorganization
within the meaning of Section 368(a)(2)(E) of the Code. For purposes of
determining the percentage of High Desert's net and gross assets acquired in the
Share Exchange/Merger, the following assets will be treated as property held
immediately prior, but not subsequent, to the Share Exchange/Merger: assets used
by High Desert at any time through the Closing Date (A) to pay expenses that are
directly related to the Share Exchange, and (B) to make distributions,
redemptions or other payments in respect of the High Desert common stock or
rights to acquire such stock that are made in contemplation of the Share
Exchange/Merger or related thereto.

- 12 -

           

(d)   Buyer and the Stockholder will treat the Share Exchange/Merger as a
reorganization within the meaning of Section 368(a) of the Code; they will file
Tax Return statements in accordance with Treas. Reg. Section 1.368-3 that are
consistent with such treatment; and they will not take any Tax Return position
that is inconsistent with such treatment.  

     

5.7   Conduct of Business After Execution of Agreement. After the execution
hereof, until the Closing of this Agreement, subject to applicable law, the
Stockholder in her capacity as an officer and director of High Desert shall not
take any action, including the execution of any contractual obligation or
agreement voting in favor of any director resolution, that would cause High
Desert or any of its Subsidiaries to take any action inconsistent with its
ordinary course activities prior to the date hereof, or that would have any
adverse effect on the assets of High Desert or any of its Subsidiaries.  

     

5.8   Obligations Under Billson/Houghton Settlement Agreement. The Stockholder
and Buyer hereby agree that at the Closing, Stockholder shall assign the
Billson/Houghton Settlement Agreement to Buyer pursuant to an assignment and
assumption agreement mutually agreeable to the parties. The Stockholder and
Buyer further agree that pursuant to that assignment and assumption agreement,
Buyer shall assume only those obligations of the Stockholder that are set forth
in Sections 4(c)(i), 4(e), 4(f) and 4(g) of the Billson/Houghton Settlement
Agreement, and the Stockholder shall retain the obligations set forth in
Sections 4(c)(ii), 4(i), 6(a), 6(b) and 6(c) of the Billson/Houghton Agreement
and indemnify, defend and hold Buyer and its successors and assigns harmless
from and against any Indemnifiable Costs they may incur or sustain arising out
of Stockholder's failure to perform those obligations.  

     

5.9   Sale of Shares Following the Closing. If requested in writing by the
Stockholder with respect to any proposed sale of Shares on a public market by
Stockholder at such time as the Stockholder owns more than 5% of the issued and
outstanding shares of Buyer, Buyer shall cause, within one business day of
receiving the request, Davis Graham & Stubbs LLP (or any successor as outside
securities counsel to Buyer) to issue a legal opinion in the form of the opinion
attached as Exhibit C to this Agreement, addressed to the Stockholder, Buyer and
the transfer agent of Buyer; and to deliver the manually signed opinion (a
facsimile copy being acceptable for such delivery) to each of these addressees.
This obligation is subject to the Stockholder's providing Buyer, together with
any written request for such an opinion, a manually signed copy (a facsimile
copy being acceptable) of the representation certificate attached as Exhibit A
to such form of opinion for use by such counsel in giving the opinion.  

ARTICLE VI

CONDITIONS

 

     

6.1   Conditions to the Obligations of Each Party. The obligations of the
Stockholder, on the one hand, and Buyer, on the other hand, to consummate the
purchase and sale of Shares are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the condition
that no U.S. or Canadian court, arbitrator or governmental body, agency or
official shall have issued any order, decree or ruling and there shall not be
any

- 13 -

statute, rule or regulation restraining, enjoining or prohibiting the
consummation of the transactions contemplated hereby, and no such action shall
be pending.

 

     

6.2   Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the purchase of Shares contemplated hereby are subject to the
satisfaction (or waiver by Buyer) of the following further conditions:  

           

(a)   the representations and warranties of the Stockholder shall have been true
and accurate in all material respects both when made and (except for those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need only be true and
accurate as of such date or with respect to such period) as of the Closing as if
made at and as of such time;  

           

(b)   the Stockholder shall have performed her obligations hereunder required to
be performed by her at or prior to the Closing;  

           

(c)   all actions by or in respect of or filings with any Governmental Entity,
agency, official, or authority required to permit the consummation of the
purchase of Shares contemplated hereby, including, if required, approval by
TSX-V of the transfer of the Shares, and all consents and approvals by third
parties that are required in order to prevent a breach of, a default under, or a
termination, change in the terms or conditions, or modification of, any
instrument, contract, lease, license or other agreement to which High Desert or
any of its Subsidiaries is a party (in each case on terms and conditions
reasonably satisfactory to Buyer) shall have been obtained;  

           

(d)   the Stockholder shall have delivered to Buyer certificates representing
the Shares; provided, however, that Buyer and the Stockholder acknowledge and
agree that the Stockholder has been unable to locate two stock certificates,
stock certificate no. 2933, issued on February 10, 1999 representing 85,000
Shares, and stock certificate no. 4048, issued on January 18, 2002, representing
23,419 Shares, and if the Stockholder has not obtained substitute certificates
for those shares on or prior to the Closing, the parties shall proceed with the
Closing, but 3,101 shares of Royal Gold Stock will be held in escrow by Davis,
Graham & Stubbs LLP (the "Escrow Agent") to be released to Stockholder by the
Escrow Agent upon receipt by the Escrow Agent of substitute stock certificates
for those Shares.  

           

(e)   Buyer shall have concluded its due diligence investigation of the assets,
business, properties and operations of High Desert and its Subsidiaries and the
results thereof shall be satisfactory to Buyer in its sole discretion;  

           

(f)   since September 30, 2002, there shall have been no material adverse change
with respect to the financial condition or results of operations of High Desert
or any of its Subsidiaries; and  

           

(g)   the Stockholder shall have delivered the documents referred to in Sections
2.3(a)(iii) and (iv) and such other closing certificates and other documents as
Buyer may reasonably request, including an estoppel certificate acceptable to
Buyer in its sole discretion from the Billson/Houghton parties acknowledging
that the Stockholder has performed all of her material obligations thereunder
and confirming Buyer's understanding (as set forth in

- 14 -

Section 5.8) as to which of the obligations of the Stockholder thereunder will
be binding on Buyer going forward and which obligations shall remain the
responsibility of Stockholder.

 

     

6.3   Conditions to the Obligations of Stockholder. The obligations of the
Stockholder to consummate the sale of Shares contemplated hereby are subject to
the satisfaction (or waiver by Stockholder) of the following further conditions:
 

           

(a)   the representations and warranties of Buyer shall have been true and
accurate in all material respects both when made and (except for those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need only be true and
accurate as of such date or with respect to such period) as of the Closing as if
made at and as of such time;  

           

(b)   Buyer shall have performed all of the obligations hereunder required to be
performed by it at or prior to the Closing;  

           

(c)   Buyer shall have delivered to the Stockholder the Purchase Price,
including certificates of Royal Gold Stock, free of restrictive legend, and such
Royal Gold Stock shall be duly registered and freely tradable;  

           

(d)   all actions by or in respect of or filings with any Governmental Entity,
agency, official, or authority required to permit the consummation of the
purchase of Shares contemplated hereby, and all consents and approvals by third
parties that are required in order to prevent a breach of, a default under, or a
termination, change in the terms or conditions, or modification of, any
instrument, contract, lease, license or other agreement to which Buyer is a
party (in each case on terms and conditions reasonably satisfactory to the
Stockholder) shall have been obtained;  

           

(e)   since June 30, 2002, there has been no material adverse change with
respect to the financial condition, business, properties, assets or results of
operations of Buyer; and  

           

(f)   Buyer shall have delivered the legal opinion referred to in Section
2.3(b)(iv), the letter from Buyer's transfer agent referred to in Section
2.3(b)(v), and such other closing certificates and other documents as the
Stockholder may reasonably request, including an estoppel certificate acceptable
to the Stockholder in her sole discretion from the Billson/Houghton parties
acknowledging that the Stockholder has performed all of her obligations
thereunder and confirming Stockholder's understanding (as set forth in
Section 5.8) as to which of the obligations of the Stockholder thereunder will
be binding on Buyer going forward (and will therefor no longer be deemed
obligations of the Stockholder) and which obligations shall remain the
responsibility of Stockholder.  

ARTICLE VII

INDEMNIFICATION OF BUYER AND THE STOCKHOLDER

 

     

7.1   Indemnification of Buyer. Stockholder agrees that following the Closing
she will indemnify, defend and hold harmless Buyer and each officer, director,
agent, stockholder,

- 15 -

representative and affiliate of Buyer, including, without limitation, any
successor of Buyer (collectively, the "Buyer Indemnitees") from and against any
and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses (including court costs and reasonable attorneys'
fees and expenses incurred in investigating and preparing for any litigation or
proceeding) (collectively, the "Indemnifiable Costs"), which any of the Buyer
Indemnitees may sustain, or to which any of the Buyer Indemnitees may be
subjected, arising out of (i) any inaccuracy in any representation or the breach
of any warranty of Stockholder under this Agreement, or (ii) any failure by the
Stockholder to duly perform or observe any term, provision, covenant, agreement
or condition in this Agreement on her part to be performed or observed, whether
before or after the Closing; provided, however, that Stockholder shall not have
any obligation to indemnify any Buyer Indemnitee from and against any
Indemnifiable Costs described in this sentence, until the Indemnifiable Costs
exceed $300,000 but then from the first dollar of loss sustained, and provided
further that the Stockholder shall have no liability for Indemnifiable Costs
described in this sentence in excess of $2,400,000 of Indemnifiable Costs (the
"Maximum Liability Amount"), except as expressly provided herein. The
Stockholder shall (except as expressly provided herein) be responsible only for
Indemnifiable Costs relating to claims with respect to which written claim for
indemnification was given to Stockholder on or before the two-year anniversary
date of the Closing Date. The indemnification remedy provided in this
Section 7.1 shall be the exclusive remedy of the Buyer Indemnitees for any
breaches and misrepresentations (whether in contract or in tort).
Notwithstanding anything contained in this Agreement to the contrary, any claims
relating to (x) breaches and misrepresentations with respect to Sections 3.1
(Ownership of Stock), 3.2 (Authorization), 3.3 (No Approvals or Conflicts), 3.9
(Agreements) or 3.10 (No Brokers' or Other Fees), (y) breaches of covenants or
(z) any fraud (as contrasted to negligent misrepresentation) or intentional
misrepresentation by the Stockholder (A) shall not be subject to the Maximum
Liability Amount, (B) may be brought at any time within the applicable statute
of limitations periods, even if notice for such claim for indemnification is
given beyond the two-year anniversary of the Closing Date and (C) with respect
to claims under (x), (y) and (z) above, Indemnifiable Costs shall not be
required first to exceed $300,000 before the Stockholder shall be subject to
liability for such costs.

 

     

7.2   Indemnification of the Stockholder. Buyer agrees that following the
Closing it will indemnify and save and hold the Stockholder and any successors
of the Stockholder (collectively the "Stockholder Indemnitees") harmless from
and against any Indemnifiable Costs (as defined above) which any of the
Stockholder Indemnitees may sustain, or to which any of the Stockholder
Indemnitees may be subjected, arising out of (i) any inaccuracy in any
representation or the breach of any warranty of Buyer under this Agreement, or
(ii) any failure by Buyer to duly perform or observe any term, provision,
covenant, agreement or condition in this Agreement on the part of Buyer to be
performed or observed whether before or after the Closing; provided, however,
that (except as expressly provided herein) Buyer shall not have any obligation
to indemnify any Stockholder Indemnitee from and against any Indemnifiable Costs
described in clause (i) of this sentence until the Indemnifiable Costs exceed
$300,000 but then from the first dollar of loss sustained, and provided further
that Buyer shall have no liability for Indemnifiable Costs arising under
clause (i) and described in this proviso in excess of the Maximum Liability
Amount or for which claims with respect to which written claim for
indemnification was given to Buyer after the two-year anniversary of the Closing
Date. Notwithstanding anything contained in this Agreement to the contrary, any
claim with respect to Sections 4.1 (Authorization), 4.2 (No Approvals or
Conflicts), 4.4 (No Brokers' or Other

- 16 -

Fees), or 4.7 (Shares To Be Issued) or clause (ii) above hereof shall not be
subject to the Maximum Liability Amount, shall not be required first to exceed
$300,000 before Buyer shall be subject to liability for such costs and may be
brought at any time within the applicable statute of limitations periods, even
if notice for such claim for indemnification is given beyond the two-year
anniversary of the Closing Date. The indemnification remedy provided in this
Section 7.2 shall be the exclusive remedy of the Stockholder Indemnitees for any
breaches and misrepresentations (whether in contract or in tort), except in the
case of fraud (as contrasted to negligent misrepresentation) or intentional
misrepresentation.

 

     

7.3   Indemnification of Director. For a period of not less than six years from
and after the Closing, Buyer agrees to cause High Desert (or Merger Sub, if it
survives the Merger) to indemnify and hold harmless the Stockholder in her
capacity as a director and officer of High Desert to the full extent directors
and officers may be indemnified by High Desert pursuant to High Desert's
Certificate of Incorporation and bylaws as in effect as of the date hereof for
acts and omissions occurring at or prior to the Closing and shall reimburse
Stockholder for reasonable litigation expenses incurred by the Stockholder in
connection with defending any action arising out of such acts or omissions, to
the extent provided in High Desert's Certificate of Incorporation and bylaws and
the General Corporation law of the State of Delaware. The indemnification
obligation set forth in this Section 7.3 shall not apply to controversies
between Stockholder and Buyer arising out of or pertaining to this Agreement.  

     

7.4   Cooperation.  

           

(a)   Notice. The Stockholder and Buyer will give prompt written notice to the
other of any assertion, claim or demand which Buyer or Stockholder discovers or
of which notice is received after the Closing and which might give rise to a
claim by Buyer against the Stockholder under Section 7.1 hereof, or by
Stockholder against Buyer under Section 7.2 or 7.3 hereof, stating in reasonable
detail the nature, basis and amount thereof; provided, however, that subject to
the requirement that notice be given within the time periods set forth in
Section 7.1, Section 7.2 and Section 7.3, the failure to give such notice shall
not affect any claim for indemnification thereunder unless such failure to give
notice materially and adversely affects the indemnifying party's ability to
defend against such assertion, claim or demand.  

           

(b)   Claims. In case of any claim by a third party, any suit by any
governmental body, or any legal, administrative or arbitration proceeding with
respect to which the indemnifying party may have liability under the indemnity
provisions of Section 7.1, Section 7.2 or 7.3 hereof, the indemnifying party
shall be entitled to participate therein, and to the extent desired by the
indemnifying party, to assume the defense thereof, and after notice from the
indemnifying party of its election so to assume the defense thereof, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the indemnified party in connection with
the defense thereof, other than reasonable costs of investigation, unless the
indemnifying party does not actually assume the defense thereof following notice
of such election or unless the indemnified party has defenses available to it
that are different than, or in conflict with, those available to the
indemnifying party. Buyer or the Stockholder shall make available to the other
and its attorneys and accountants, at all reasonable times, all books and
records relating to such suit, claim or proceeding, and Buyer and the
Stockholder will render to each other such assistance as may reasonably be
required of each

- 17 -

other in order to insure proper and adequate defense of any such suit, claim or
proceeding. Buyer and the Stockholder will not make any settlement of any claim
which might give rise to liability of the indemnifying party hereunder under the
indemnity agreement contained in Section 7.1, Section 7.2 or 7.3 hereof without
the consent of the other, which consent shall not be unreasonably withheld or
delayed. If the indemnifying party shall desire and be able to effect a
compromise or settlement of any such claim, which settlement or compromise shall
fully and finally relieve the indemnified party of any liability in connection
with such cause of action and claim and the indemnified party shall refuse to
consent to or participate (to the extent it has liability for a portion of the
Indemnifiable Costs) in such compromise or settlement, then the liability of the
indemnifying party to the indemnified party with respect to settlement of such
claim shall be limited to the lesser of the amount so offered in compromise or
settlement or the Maximum Liability Amount provided under Section 7.1 or Section
7.2 (if the claim is brought under Section 7.1 or 7.2) and the indemnifying
party shall have no continuing liability for attorney fees or litigation
expenses of the indemnified party or obligation to defend the indemnified party
thereafter if it pays over the amount of such indemnification to the indemnified
party. If the indemnified party shall desire to and be able to effect a
compromise or settlement of any liability, which compromise or settlement shall
fully and finally relieve the indemnifying party of any liability in connection
with such cause of action and claim (other than the payments called for by such
compromise or settlement) and the indemnifying party shall refuse to consent,
then, in addition to any other amounts for which the indemnifying party may be
liable hereunder, the indemnifying party shall be liable for all Indemnifiable
Costs incurred by the indemnified party in excess of the proposed compromise or
settlement amount, without regard to the Maximum Liability Amount.

 

           

(c)   Control of Defense; Exceptions, etc. Notwithstanding the provisions of
Section 7.4(b): (i) the indemnified party will be entitled to participate in the
defense of any claim and to employ counsel of its choice for such purpose at its
own expense (provided that the indemnifying party will bear the reasonable fees
and expenses of such separate counsel incurred prior to the date upon which the
indemnifying party effectively assumes control of such defense), and (ii) the
indemnifying party will not be entitled to assume control of the defense of any
such claim, and will pay the reasonable fees and expenses of legal counsel
retained by the indemnified party, if:

   

           (A)   

the indemnified party reasonably believes that there exists or could arise a
conflict of interest which, under applicable principles of legal ethics, could
prohibit a single legal counsel from representing both the indemnified party and
the indemnifying party in such proceeding;    

           (B)   

a court of competent jurisdiction rules that the indemnifying party has failed
or is failing to prosecute or defend vigorously such claim;    

           (C)   

the claim for indemnification relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or investigation or the
claim seeks injunctive or other equitable relief against the indemnified party;
or    

           (D)   

the indemnifying party and the indemnified party shall jointly control the
defense of any claim (and the indemnifying party will pay the reasonable fees

- 18 -

 

and expenses of legal counsel retained by the indemnified party) in the event
that the amount then in question in connection with such claim is greater than
the Maximum Liability Amount (less any amount paid by the indemnifying party to
that date).

 

ARTICLE VIII

TERMINATION

 

     

8.1   Termination. This Agreement may be terminated at any time prior to the
Closing  

           

(a)   by mutual consent of the Stockholder and Buyer;  

           

(b)   by either the Stockholder or Buyer if there has been a material
misrepresentation or material breach of warranty on the part of the other party
in the representations and warranties set forth in this Agreement, or if events
have occurred (that were not caused by any intentional action or inaction on the
part of the terminating party) which have made it impossible to satisfy a
condition precedent to the terminating party's obligations to consummate the
transactions contemplated hereby; or  

           

(c)   by either the Stockholder or Buyer if the Closing hereunder has not been
consummated by November 22, 2002, provided that, if a party's willful breach of
this Agreement has prevented the consummation of the transactions contemplated
hereby, that party shall not be entitled to terminate pursuant to this
Section 8.1. If neither the Stockholder nor Buyer elects to terminate this
Agreement pursuant to this Section 8.1(c), and the parties proceed to a Closing
subsequent to November 22, 2002, the parties agree that the Stockholder,
notwithstanding the provisions of Section 2.1, unless the failure to close on or
before November 22, 2002 is the result of the Stockholder's failure to use good
faith efforts to satisfy the conditions to Closing set forth in Section 6.2, may
elect, at any time up to ten business days prior to the rescheduled Closing (or
on the date the parties agree to the rescheduled Closing if that date is less
than ten business days prior to the rescheduled Closing), to receive the
Purchase Price in any combination of Royal Gold Stock and/or cash, subject to
the provisions of Section 5.6.  

     

8.2   Effect of Termination. In the event of termination of this Agreement by
either the Stockholder or Buyer as provided above, this Agreement will forthwith
become void and there will be no liability on the part of either Buyer or the
Stockholder, except for material willful breaches of and intentional
misstatements in or pursuant to this Agreement prior to the time of such
termination; provided, however, that the obligations of all parties pursuant to
Section 5.5 shall survive notwithstanding the termination of this Agreement.  

ARTICLE IX

MISCELLANEOUS

 

     

9.1   Fees and Expenses. Each party hereto shall bear its own expenses in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement. If any party hereto has retained a broker or
finder in connection with the transactions contemplated herein, such party shall
bear the fees and expenses of such broker or finder. All transfer, documentary,
sales, use, stamp, registration and other such taxes and fees incurred in
connection

- 19 -

with the transactions contemplated by this Agreement shall be paid by the
Stockholder when due.

 

     

9.2   Governing Law. This Agreement shall be construed under and governed by the
laws of the State of Delaware without regard to the conflicts of laws provisions
thereof.  

     

9.3   Amendment. This Agreement may not be amended, modified or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.  

     

9.4   Successors and Assigns; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior consent of the other party hereto, except that Buyer may assign this
Agreement and all or a portion of its rights hereunder to any affiliate, so long
as the consideration payable to the Stockholder remains the same as the
consideration set forth in this Agreement.  

     

9.5   Waiver. Any of the terms or conditions of this Agreement which may be
lawfully waived may be waived at any time by each party which is entitled to the
benefits thereof. Any waiver of any of the provisions of this Agreement by any
party hereto shall be binding only if set forth in an instrument in writing
executed on behalf of such party. No failure to enforce any provision of this
Agreement shall be deemed to or shall constitute a waiver of such provision and
no waiver of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.  

     

9.6   Survival of Representations and Warranties. The representations and
warranties in this Agreement or in any disclosure schedule, instrument or other
document delivered pursuant to this Agreement shall survive in accordance with
Section 7.1 and Section 7.2 hereof.  

     

9.7   Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given by delivery, by telex,
telecopier or by mail (registered or certified mail, postage prepaid, return
receipt requested) to the respective parties as follows:

     

If to Buyer:

     

Royal Gold, Inc.
1660 Wynkoop, Suite 1000
Denver, Colorado 80202-1132
(facsimile) 303-595-9385
(telephone) 303-573-1660

- 21 -

 

with a copy to:

   

Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, Colorado 80202
(facsimile) 303-893-1379
(telephone) 303-892-9400
Attention: Patricia Peterson

     

If to the Stockholder:

   

P. Lee Halavais
1112 River Street
Elko, Nevada 89801
(facsimile) 775-753-4270
(telephone) 775-934-3630

     

with a copy to:

   

Holland & Hart LLP
8390 East Crescent Parkway
Suite 400
Greenwood Village, Colorado 80111
(facsimile) 303-290-1606
(telephone) 303-290-1621
Attention: Paul Schlauch

 

or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.

 

     

9.8   Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Use of the term "including" in the Agreement shall mean including,
but not by way of limitation.  

     

9.9   Complete Agreement. This Agreement and the other documents and writings
referred to herein or delivered pursuant hereto, including but not limited to
the Confidentiality Agreement, contain the entire understanding of the parties
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and thereof, and no party shall be liable
or bound to the other in any manner by any warranties, representations,
covenants or agreements except as specifically set forth herein or expressly
required to be made pursuant hereto.  

     

9.10  Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.

- 21 -

     

9.11  Headings. The headings contained in this Agreement are for reference only
and shall not affect in any way the meaning or interpretation of this Agreement.
 

     

9.12   Severability. Any provision of this Agreement which is invalid, illegal
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality, or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.  

     

9.13  Third Parties. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than the
parties hereto and their permitted successors or assigns, any rights or remedies
under or by reason of this Agreement.  

     

9.14   Resolution of Disputes.  

           

(a)   Any dispute arising out of or relating to this Agreement shall be resolved
in accordance with the procedures set forth in this Section 9.14. These
procedures shall be the sole and exclusive process for the resolution of any
such dispute. However, any party may initiate litigation to obtain a preliminary
injunction or other provisional relief, pending the completion of the procedures
set forth in this Section 9.14, if in its sole judgment such action is necessary
to avoid irreparable damage or to preserve the status quo.  

           

(b)   The parties shall attempt in good faith to resolve any dispute arising out
of or relating to this Agreement promptly by negotiation. Any party may give the
other party written notice of any dispute not resolved in the normal course of
business. Within 20 days after delivery of the notice, the receiving party shall
submit to the other a written response. The notice and the response shall
include a statement of each party's position and a summary of arguments
supporting that position. Within 30 days after delivery of the disputing party's
notice, the parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to resolve the
dispute. All reasonable requests for information made by one party to the other
shall be honored. If the matter has not been resolved within 45 days after the
disputing party's notice, or if the parties fail to meet within 30 days
thereafter, either party may initiate mediation of the controversy as provided
hereinafter.  

           

(c)   If the dispute has not been resolved by negotiation as provided herein,
the parties shall endeavor to settle the dispute by mediation. If the matter has
not been resolved within 90 days after the disputing party's notice, or if the
parties fail to initiate or complete mediation within such period, either party
may initiate arbitration of the controversy as provided hereinafter.  

           

(d)   All negotiations held pursuant to subparagraphs (b) and (c) are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.  

           

(e)   Any dispute arising out of or relating to this Agreement or the breach,
termination or validity thereof which has not been resolved by use of the
processes set forth in Sections 9.14(b) and (c) shall be resolved by arbitration
in accordance with the Rules of

- 22 -

Commercial Arbitration of the American Arbitration Association. However, if one
party has requested the other to participate in the processes set forth in
Sections 9.14(b) and (c) and the other has failed to participate, the requesting
party may initiate arbitration immediately. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Section 1-16, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Denver, Colorado. The
arbitrators are not empowered to award damages in excess of compensatory damages
and each party hereby irrevocably waives any right to recover such damages with
respect to any dispute resolved by arbitration.

 

           

(f)   All applicable statutes of limitation and defenses based upon the passage
of time shall be deemed tolled while the procedures specified in this
Section 9.14 are pending.  

     

9.15   Further Assurances. Each party hereto agrees that it shall take such
actions and sign such documents reasonably requested by any other party hereto
to enable such requesting party to enjoy the benefits conferred upon such party
hereunder.  

     

9.16   Submission to Jurisdiction; Waivers. Each of Buyer and Stockholder hereby
irrevocably and unconditionally:  

           

(a)   submits for itself and its property in any legal action or proceeding
relating to the enforcement of Section 9.14 of this Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of Colorado, the
courts of the United States of America for the District of Colorado, and
appellate courts from any of the foregoing;  

           

(b)   consents that any such action or proceeding may be brought in such courts,
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;
 

           

(c)   agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 9.7 hereof; and  

           

(d)   agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or, subject to Section 9.14 hereof,
shall limit the right to sue in any other jurisdiction.  

     

IN WITNESS WHEREOF, each of Buyer and Stockholder have caused this Share
Exchange Agreement to be executed as of the day and year first above written.

     

STOCKHOLDER:

       

/s/ P. Lee Halavais                  

P. Lee Halavais

- 23 -

     

BUYER:

     

ROYAL GOLD, INC.

         

By: /s/ Stanley Dempsey               
Name: Stanley Dempsey
Title: Chief Executive Officer and President

   

- 24 -

SHARE EXCHANGE AGREEMENT

 

Schedule 3.1

SHARE EXCHANGE AGREEMENT

 

Schedule 3.3

2

SHARE EXCHANGE AGREEMENT

 

Schedule 3.4

3

SHARE EXCHANGE AGREEMENT

 

Schedule 3.5(a)

4

SHARE EXCHANGE AGREEMENT

 

Schedule 3.5(b)

5

SHARE EXCHANGE AGREEMENT

 

Schedule 3.5(c)

6

SHARE EXCHANGE AGREEMENT

 

Schedule 3.6

7

SHARE EXCHANGE AGREEMENT

 

Schedule 3.8

8

SHARE EXCHANGE AGREEMENT

 

Schedule 3.11

9

SHARE EXCHANGE AGREEMENT

 

Schedule 4.2

 

None.

10

SHARE EXCHANGE AGREEMENT

 

Schedule 4.5(a)

 

See Royal Gold Financial Statements attached.

11

SHARE EXCHANGE AGREEMENT

 

Schedule 4.5(b)

 

1. Sale of 500,000 shares of Royal Gold Stock to Acqua Wellington North American
Equities Fund, Ltd. on July 11, 2002. (See attached press release).

 

2. Sale of 500,000 shares of Royal Gold Stock to Acqua Wellington North American
Equities Fund, Ltd. on September 10, 2002. (See attached press release).

12

SHARE EXCHANGE AGREEMENT

 

Schedule 4.8

 

See Royal Gold Restated Certificate of Incorporation and Bylaws attached.

13

EXHIBIT A

EXHBIT B-1

EXHIBIT B-2

EXHIBIT C