Unassociated Document


    
      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.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      


      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.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      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;

      


      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      


      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	 


        

      

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      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:	 
	 	 	 


      

       

         

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      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 1⁄2 , 2 SE 1⁄4 , 11 E 1⁄2 , 12, 13, 14 E 1⁄2 , 23, NE 1⁄4 , 24 N 1⁄2 ,

      


      T28N
        R34E
        Sec. 5 SW 1⁄2 , 6 S 1⁄2, 7, 8 W 1⁄2 , 17 W 1⁄2 , 18, 19 N 1⁄2 , 20 NW 1⁄4

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      


      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.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (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.

      


      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      


      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.

      


      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      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).

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      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).

      


      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      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.

      


      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      
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.

      


      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      “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. 

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      “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

          
            

          

        

        
          
          

        

      

      


      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

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      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

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      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).

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      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.

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      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
	 	 	 	 	 


              

               

            

            
              
                
                

              

              
                32

                
                  

                

              

              
                
                

              

            

             

          

        

      

      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

                    	 	 


            

          

        

      

       

       

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      


      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 

      


      


      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      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;

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      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