Document:

Gryphon Gold Corp.: Exhibit 10.1 - Filed by newsfilecorp.com

	Execution
      Version 

 

 

CONTRIBUTION AGREEMENT

dated as of January 30, 2013

among

GRYPHON GOLD CORPORATION
BOREALIS MINING COMPANY
LLC
WATERTON GLOBAL VALUE, L.P.

and

BOREALIS HOLDINGS LLC

 

 

TABLE OF CONTENTS

	  	  	Page
	  	  	  
	ARTICLE
      1 DEFINITIONS 	1
      
	  	  	  
	       
         1.1
      	Definitions
      	1
      
	           1.2
      	Rules
      of Interpretation 	10
      
	  	  	  
	ARTICLE
      2 PURCHASE AND SALE; FACILITY FORGIVENESS; CLOSING 	11
      
	  	  	  
	           2.1
      	Purchase
      and Sale 	11
      
	       
         2.2
      	Closing
      	11
      
	  	  	  
	ARTICLE
      3 REPRESENTATIONS AND WARRANTIES OF THE SELLER 	12
      
	  	  	  
	       
         3.1
      	Corporate
      Status and Authority of the Seller 	12
      
	           3.2
      	Organization,
      Authority and Qualification of the Company 	13
      
	       
         3.3
      	Membership
      Interest Authorized 	13
      
	           3.4
      	No
      Conflicts, Etc 	14
      
	       
         3.5
      	Financial
      Statements 	14
      
	           3.6
      	Absence
      of Undisclosed Liabilities 	14
      
	       
         3.7
      	Assets
      	15
      
	           3.8
      	Material
      Contracts 	19
      
	       
         3.9
      	Affiliate
      Arrangements 	21
      
	           3.10
      	Governmental
      Authorizations, Compliance with Law 	21
      
	       
         3.11
      	Litigation;
      Proceedings 	22
      
	           3.12
      	Taxes
      	23
      
	       
         3.13
      	Absence
      of Changes 	25
      
	           3.14
      	Environmental
      Compliance 	26
      
	       
         3.15
      	Insurance
      	27
      
	           3.16
      	Bank
      Accounts 	28
      
	       
         3.17
      	Employment
      Matters 	28
      
	           3.18
      	Suppliers
      	29
      
	       
         3.19
      	Employee
      Benefit Plans and Matters 	29
      
	           3.20
      	Forecasts
      	32
      
	       
         3.21
      	Unlawful
      Payments and Contributions 	32
      
	           3.22
      	Books
      and Records 	32
      
	       
         3.23
      	Condition
      and Sufficiency of Assets 	32
      
	           3.24
      	Full
      Disclosure 	33
      
	       
         3.25
      	Brokers
      	33
      
	  	  	  
	ARTICLE
      4 REPRESENTATIONS AND WARRANTIES OF PURCHASER 	33
      
	  	  	  
	       
         4.1
      	Corporate
      Status and Authority 	33
      
	           4.2
      	No
      Conflicts 	34
      
	       
         4.3
      	Litigation
      	34
      
	           4.4
      	Speculative
      Investment 	34
      

-i-

TABLE OF CONTENTS
(continued)

	  	  	Page
      
	  	  	  
	       
         4.5 	Accredited
      Investor 	34 
	           4.6 	Securities Not Registered
      	34 
	       
         4.7 	Legended
      Certificates 	34 
	           4.8 	Brokers 	35 
	  	  	  
	ARTICLE 5 COVENANTS 	35 
	  	  	  
	           5.1 	Further Assurances; Transfer
      of Certain Assets 	35 
	       
         5.2 	Disclosure
      Schedules 	36 
	           5.3 	Taxes 	36 
	       
         5.4 	Fees and
      Expenses 	38 
	  	  	  
	ARTICLE 6
      CONDITIONS PRECEDENT OF PURCHASER 	38 
	  	  	  
	       
         6.1 	Conditions
      Precedent 	38 
	           6.2 	Waiver 	41 
	  	  	  
	ARTICLE 7 CONDITIONS PRECEDENT
      OF THE SELLER 	41 
	  	  	  
	           7.1 	Conditions Precedent 	41 
	       
         7.2 	Waiver
    	41 
	  	  	  
	ARTICLE 8
      INDEMNIFICATION 	42 
	  	  	  
	       
         8.1 	Indemnity by
      the Seller 	42 
	           8.2 	Indemnity by the Purchaser
      	42 
	       
         8.3 	Notification
      of Claims 	43 
	           8.4 	Defense of Claims 	43 
	       
         8.5 	Access and
      Cooperation 	44 
	           8.6 	Assessment of Claims 	44 
	           8.7 	Survival of
      Representations and Warranties; Knowledge of Breach; No Additional
      Representations 	44 
	           8.8 	Consequential and Punitive
      Damages 	45 
	       
         8.9 	Certain
      Limitations 	45 
	           8.10 	Insurance 	47 
	       
         8.11 	Mitigation
      	47 
	           8.12 	Offset 	47 
	       
         8.13 	Limitation
      on Indemnification 	47 
	           8.14 	Third-Party Beneficiaries
      	47 
	  	  	  
	ARTICLE 9 MISCELLANEOUS
	47 
	  	  	  
	           9.1 	Amendment 	47 
	       
         9.2 	Entire
      Agreement 	47 

-ii-

TABLE OF CONTENTS
(continued)

	 	  	Page
	  	  	  
	           9.3
      	Notices
      	48
      
	           9.4
      	Severability
      	48
      
	           9.5
      	Waiver;
      Survival 	48
      
	           9.6
      	Binding
      Effect; Assignment 	49
      
	           9.7
      	Counterparts
      	49
      
	           9.8
      	Governing
      Law; Consent to Jurisdiction 	49
      
	           9.9
      	Specific
      Performance 	49
      
	           9.10
      	Headings
      	50
      
	           9.11
      	Exhibits
      and Schedules 	50
      
	           9.12
      	Electronic
      Signatures 	50
      
	           9.13
      	Acknowledgements
      	50
      
	  	  	  
	  	  	  
	EXHIBITS 	  	  
	  	  	  
	Exhibit A 	Form of Membership Interest Assignment 	  
	Exhibit B 	Form of Amended and Restated
      Limited Liability Company Agreement 	  
	Exhibit C 	Form of Transition Services Agreement 	  

-iii-

SCHEDULES

	Schedule 1.1(a) 	Transaction Documents 
	Schedule 3.1(b) 	Corporate Status and Authority of the Seller
  
	Schedule 3.2 	Organization, Authority and Qualification of
      the Company 
	Schedule 3.4(b) 	Governmental Consents 
	Schedule 3.5 	Financial Statements 
	Schedule 3.6 	Liabilities 
	Schedule 3.7(a) 	Real Property 
	Schedule 3.7(b) 	Personal Property 
	Schedule 3.7(d) 	Royalties 
	Schedule 3.7(e) 	Reserves 
	Schedule 3.8(a) 	Material Contracts 
	Schedule 3.8(b) 	Material Contracts in Default 
	Schedule 3.9 	Affiliate Arrangements 
	Schedule 3.10(a) 	Permits 
	Schedule 3.10(b) 	Compliance with Permits 
	Schedule 3.10(c) 	Permit Applications 
	Schedule 3.10(d) 	Bonds 
	Schedule 3.11(a) 	Litigation 
	Schedule 3.11(b) 	Governmental Order 
	Schedule 3.12 	Tax Returns 
	Schedule 3.13 	Material Adverse Effect 
	Schedule 3.14(a) 	Environmental Compliance 
	Schedule 3.14(b) 	Release of Hazardous Materials 
	Schedule 3.14(c) 	Use of Hazardous Materials 
	Schedule 3.14(d) 	Underground or Above Ground Storage Tanks

	Schedule 3.15 	Insurance 
	Schedule 3.16 	Bank Accounts 
	Schedule 3.17 	Employees, Independent Contractors and
      Consultants 
	Schedule 3.18 	Top 10 Suppliers 
	Schedule 3.19 	Employee Benefit Plans 
	Schedule 4.2 	Conflicts 

-iv-

CONTRIBUTION AGREEMENT

     This CONTRIBUTION AGREEMENT,
dated as of January 30, 2013 (this “Agreement”), is by and among Gryphon Gold
Corporation, a corporation organized and existing under the laws of Nevada
(“Gryphon” or “Seller”), Borealis Mining Company LLC, a limited liability
company organized and existing under the laws of Nevada (the “Company”),
Waterton Global Value, L.P., by its Investment Manager, Altitude Management
Limited (“Waterton”) and Borealis Holdings LLC, an Affiliate of Waterton
(“Holdings”, with Waterton and Holdings, collectively, together with their
successors and assigns, being collectively referred to as the “Purchaser”). The
Seller, the Company, Waterton and Holdings are each referred to individually as
a “Party” and collectively as the “Parties.”

RECITALS

     A. WHEREAS, Waterton established
in favor of Gryphon a senior secured, non-revolving credit facility (the
“Facility”) pursuant to a Senior Secured Gold Stream Credit Agreement, dated
April 18, 2012, entered into among Gryphon, as the borrower, the Company, as the
guarantor, and the Purchaser, as the lender, (as amended, modified, supplemented
or restated, the “Credit Agreement”).

     B. WHEREAS, upon the terms and
subject to the conditions contained herein, the Seller desires to sell and
transfer, and the Purchaser desires to purchase and acquire, sixty percent (60%)
of the issued and outstanding ownership and membership interests of the Company
in consideration of Waterton’s forgiveness of a portion of the Facility, in
accordance with the terms and provisions set forth herein.

AGREEMENT

     NOW, THEREFORE, for good and
valuable consideration, the receipt of which is hereby acknowledged, the Parties
hereto hereby agree as follows:

ARTICLE 1
DEFINITIONS

     1.1 Definitions. Unless
the context otherwise requires, the following terms shall have the following
meanings for all purposes of this Agreement, and certain terms defined in the
text of this Agreement similarly shall have the meanings therein given for all
purposes of this Agreement:

     “Affiliate” shall mean, with
respect to any specified Person, any other Person which, directly or indirectly,
is in control of, is controlled by, or is under common control with, such
specified Person, where “control” as used with respect to any Person shall mean
the power to direct the business and affairs of such Person, as evidenced by
equity ownership of ten percent (10%) or greater, or by agreement or otherwise.

-1-

     “Agreement,” “this Agreement,”
“herein,” “hereunder,” “hereof,” “hereby” or other like words shall mean this
Contribution Agreement as originally executed and as modified, supplemented or
amended pursuant to the applicable provisions hereof. 

     “Balance Sheet” shall have the
meaning specified in Section 3.5 hereof. 

     “Balance Sheet Date” shall have
the meaning specified in Section 3.5 hereof. 

     “Bonds” shall have the meaning
specified in Section 3.10(d) hereof. 

     “Business” shall mean the
exploration, mining, processing and sale of Metals, including mining,
processing, marketing and selling gold, together with the ownership, management
and operation of the Real Property and the Personal Property and all other
business, operations and activities conducted by the Company. 

     “Business Day” shall mean a day
other than any Saturday, Sunday or legal holiday in Denver, Colorado and
Toronto, Ontario.

     “CERCLA” shall mean the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. §§ 9601 et seq., as amended, and any successor federal Law or any
similar state or local Law.

     “Claim Notice” shall have the
meaning specified in Section 8.3(a) hereof. 

     “Class A Units” means the class
of units of the Company that are a measure of a member’s share of net profit and
net loss of the Company and which are designated as the “Class A Units.”

     “Closing” shall have the meaning
specified in Section 2.2 hereof. 

     “Closing Date” shall have the
meaning specified in Section 2.2 hereof. 

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

     “Contracts” shall mean all
contracts, leases, deeds, mortgages, licenses, instruments, notes, guaranties,
commitments, undertakings, indentures, joint ventures and all other agreements,
commitments and legally binding arrangements.

     “Credit Agreement” shall have the
meaning specified in the Recitals.

     “Disclosure Schedules” shall have
the meaning specified in Section 5.2(a) hereof.

     “Environmental Laws” shall mean
all applicable federal, state, and local statutes, ordinances, regulations,
rules, Laws, permits, or common law duty or claim pertaining to the generation,
production, installation, use, storage, treatment, handling, distribution,
transportation, processing, release, threatened release, recycling, or disposal
of pollution, contaminants or Hazardous Materials, noise control, the protection
of human health, natural resources or the environment, reclamation, restoration
or Releases, including to human health, natural resources or the environment or reclamation, including the Clean Air Act,
442 U.S.C. § 7401 et seq.; the Clean Water Act (“CWA”), 33 U.S.C. § 1251 et seq., and the Water Quality Act of 1987; the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Marine
Protection, Research, and Sanctuaries Act, 33 U.S.C. § 1401 et seq.; the
Noise Control Act, 42 U.S.C. § 4901 et seq.; the Occupational Safety and
Health Act, 29 U.S.C. § 651 et seq.; National Environmental Policy Act,
42 U.S.C. §§ 4321, et seq.; Mine Safety and Health Act, 30 U.S.C. §§ 801, et seq.; the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §
6901 et seq., as amended by the Hazardous and Solid Waste, Amendments of
1984; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),
42 U.S.C. § 9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act, the Emergency Planning and Community Right to Know Act, and
the Radon Gas and Indoor Air Quality Research Act; the Hazardous Material
Transportation Act, 49 U.S.C. § 9601 et seq.; the Toxic Substance Control
Act, 15 U.S.C. § 2601 et seq.; the Atomic Energy Act, 42 U.S.C. § 2011 et seq.; and the Nuclear Waste Policy Act of 1982, U.S.C. § 1010 et
seq.; the Endangered Species Act, 16 U.S.C. 1531 et seq.; the Federal
Land Policy and Management Act, 43 U.S.C. 1701 et seq.; the Surface
mining Control and Reclamation Act, 30 U.S.C. 1201 et seq.; or any state
corollary of any of the foregoing or any other plans, rules regulations or
ordinances adopted, or other criteria and guidelines promulgated pursuant to the
preceding laws or other similar laws, regulations, rules or ordinances now or
hereafter in effect.

-2-

     “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder.

     “ERISA Affiliate” means, with
respect to any Person, any other Person that, together with such first Person,
would be treated as a single employer within the meaning of Section 414(b), (c),
(m) or (o) of the Code.

     “Facility” shall have the meaning
specified in the Recitals.

     “Financial Statements” shall have
the meaning specified in Section 3.5 hereof. 

     “FIRPTA Certificate” shall have
the meaning specified in Section 6.1(b)(v).

     “Governmental Authority” shall
mean the government of any nation and any state, provincial, territorial,
divisional, county, regional, city and other political subdivision thereof, any
tribal, aboriginal or native government or corporation, and any union or
commonwealth of multiple countries, such as the European Union, and any entity,
court, arbitrator or board of arbitrators, agency, department, commission,
board, bureau, regulatory authority or instrumentality of any of them exercising
executive, legislative, judicial, regulatory or administrative functions, and
any applicable securities exchange or securities regulatory authority.

     “Governmental Order” means any
order, writ, judgment, injunction, decree, demand, stipulation, determination or
award entered or ordered by or with any Governmental Authority.

     “Hazardous Materials” shall mean
any pollutants, contaminants, substances, radiation, toxic or hazardous or
extremely hazardous substances, materials, wastes, constituents, compounds, chemicals, heavy metals, natural or man-made
elements or forces (including, without limitation, petroleum, gasoline, diesel
range organics, or any by-products or fractions thereof, any form of natural
gas, Bevill Amendment materials, lead, asbestos and asbestos-containing
materials, building construction materials and debris, polychlorinated biphenyls
(“PCBs”) and PCB-containing equipment, radon and other radioactive elements,
ionizing radiation, electromagnetic field radiation and other non-ionizing
radiation, sonic forces and other natural forces, infectious, carcinogenic,
mutagenic, or etiologic agents, pesticides, defoliants, explosives, flammables,
corrosives and urea formaldehyde foam insulation) that are regulated by any
Environmental Laws.

-3-

     “Indemnitee” shall mean any
Person which may be entitled to seek indemnification pursuant to the provisions
of Sections 8.1 or 8.2 hereof. 

     “Indemnitor” shall mean any
Person which may be obligated to provide indemnification pursuant to Sections
8.1 or 8.2 hereof. 

     “IRS” shall mean the Internal
Revenue Service.

     “Knowledge” of a particular fact,
circumstance or other matter means that (a) the individual in question is
actually aware of such fact or other matter; or (b) a reasonable business person
employed in the position of the particular individual should know such fact or
matter or would reasonably be deemed negligent if he failed to discover or
otherwise become aware of such fact, circumstance or other matter in the course
of owning such assets or operating such business. 

     “Knowledge of the Seller,” “the
Seller’s Knowledge” or “Known to the Seller” or other like words shall mean the
Knowledge of the directors, officers and managers of the Seller and its
Affiliates, including: Jim O’Neil, Donald Tschabrun, Lisanna Lewis, and Robert
Cassinelli. 

     “Laws” shall mean any law,
statute, code, ordinance, treaty, order, rule, regulation, mandatory policy or
guideline, judgment, ruling, decree, injunction, franchise, permit, certificate,
license, authorization, approval or other direction or requirement (including
Environmental Laws, the Permits, energy regulations, occupational, safety and
health standards or controls, and taxation laws) of any Governmental Authority
and any common law principle, doctrine or judgment relating thereto or
interpreting the application thereof. 

     “Leased Real Property” shall have
the meaning specified in Section 3.7(a)(vii) hereof.

     “Liability” or “Liabilities”
shall mean any liability, obligation, loss, cost, damage or contingency, whether
known or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to become due,
regardless of when asserted or arising. 

     “Liens” shall mean any mortgage,
deed of trust, debenture, lien, pledge, charge, security interest,
hypothecation, indenture, preferential right, assignment, option, production
payment, easement, right-of-way, adverse interest, defect in title, right of
first option, right of first refusal, or similar restriction, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership, or other lien or encumbrance of any kind or nature or any collateral security instrument in, on or to, or any
right or interest, or the title of any vendor, lessor, lender or other secured
party to, or interest or title of any Person under any conditional sale or other
title retention agreement or capital lease with respect to, any property or
asset owned or held by such Person, the signing of any mortgage, deed of trust,
pledge, charge, security agreement, hypothecation, indenture, assignment or
similar instrument, or the signing or filing of a financing statement, personal
property security act filing or other similar instrument, which names such
Person as debtor, or the signing of any security agreement or other similar
Instrument authorizing any other party as the secured party thereunder to file
any financing statement, personal property security act filing or other similar
instrument. A Person shall be deemed to be the owner of any assets that it has
placed in trust for the benefit of the holders of its indebtedness, which
indebtedness is deemed to be extinguished under GAAP but for which such Person
remains legally liable, and such trust shall be deemed to be a Lien.

-4-

     “LLC Agreement” has the meaning
specified in Section 6.1(e).

     “Loss” or “Losses” shall mean any
and all losses, costs, damages, demands, penalties, liabilities, judgments,
deficiencies, fines, fees, or settlements; response costs, remedial costs,
investigation costs, assessment costs, reclamation costs, or inspection costs;
expenses (including interest on any amount payable to a third party as a result
of the foregoing); liabilities on account of Taxes (including interest and
penalties thereon); and any legal, accounting, auditing, consulting, or other
expenses reasonably incurred in connection with investigating, preparing,
prosecuting or defending any claims, actions or Proceedings, whether or not
resulting in any liability. 

     “Material Adverse Effect” shall
mean (i) with respect to any Person, (A) any change in the business, assets,
financial condition, or results of operations of such Person which is materially
adverse to such Person or such Person’s properties, assets or operations, taken
as a whole, (B) any change in the business, assets, financial condition, or
results of operations of such Person resulting, or reasonably expected to
result, in a Loss therefrom in excess of One Million Dollars ($1,000,000), or
(C) any change in the revenues, costs or relations with employees, agents,
lessees, customers, suppliers or counter-parties to contracts of such Person
resulting, or reasonably expected to result, in a Loss therefrom in excess of
One Million Dollars ($1,000,000); and (ii) with respect to the Seller, in
addition to the items in clause (i) hereof, (x) any circumstance resulting in,
or reasonably expected to result in, a suspension, cessation, termination or
material delay of gold mining operations on the Real Property in excess of one
(1) week (other than for normal, scheduled maintenance) or (z) the Seller shall
have received a notice of a material breach, default or notice of
non-performance from any lessor under a Real Property Lease (and such alleged
breach, default or notice would result, or is reasonably expected to result, in
a Loss in excess of One Million Dollars ($1,000,000), and all applicable cure
periods (if any) have expired. In each case, Material Adverse Effect shall be
determined whether attributable to a single occurrence or event or an
aggregation of circumstances or events. 

     “Material Contracts” shall have
the meaning specified in Section 3.8(a) hereof. 

     “Membership Interest Assignment”
shall mean the membership interest assignment substantially in the form of
Exhibit A hereto.

-5-

     “Metals” means gold, silver,
nickel, lead, zinc, molybdenum, copper, cobalt, and all other metals, minerals,
ores and similar substances.

     “Notice Period” as applied to any
Third-Party Claim for which an Indemnitee seeks to be indemnified pursuant to
this Agreement, shall mean the period ending the earlier of the following: 

     (i)
thirty (30) days after the time at which the Indemnitee either (A) received
notice or otherwise became aware of such Third-Party Claim, or (B) completed an
active investigation of circumstances likely to give rise to such Third-Party
Claim and, in each case, where such Indemnitee believes or should reasonably
believe that such facts or circumstances would give rise to such Third-Party
Claim for which such Indemnitee would be entitled to indemnification pursuant to
this Agreement; and

     (ii)
thirty (30) days after the time at which any Third-Party Claim against the
Indemnitee has become the subject of Proceedings before any court or tribunal,
or such shorter time as would allow the Indemnitor sufficient time to contest,
on the assumption that there is an arguable defense to such Third-Party Claim,
such Proceeding prior to any judgment or decision thereon.

     “Ordinary Course of Business”
means an action taken by a Person which is (i) consistent with the past practice
of such Person and is taken in the ordinary course of the normal day-to day
operations of such Person, (ii) not required to be authorized by the Board of
Directors of such Person (or by any Person or group of Persons exercising
similar authority), and (iii) similar in nature and magnitude to actions
customarily taken by such Person in the ordinary course of operations of such
Person.

     “Organizational Documents” shall
mean with respect to any Person, as applicable, (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles of organization or certificate of formation and
the regulations, operating agreement or limited liability company agreement of a
limited liability company; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing. 

     “Owned Real Property” shall have
the meaning specified in Section 3.7(a)(viii) hereof.

     “Permits” shall have the meaning
specified in Section 3.10(a) hereof.

     “Permitted Liens” shall mean (i)
Liens granted to Waterton pursuant to the Credit Agreement, (ii) Liens for taxes
and assessments or governmental charges not yet due or which are being contested
in good faith and by appropriate proceedings as to which adequate reserves are
set aside on the books and records of the Seller, (iii) Liens in favor of
landlords, carriers, warehousemen, mechanics, workmen and materialmen and
construction or similar Liens arising by operation of law or incurred in the
Ordinary Course of Business for sums not yet due, which are being diligently
contested in good faith and as to which adequate reserves are set aside on the
books and records of the Seller and which, individually or in the aggregate are
not material in amount, (iv) rights reserved to or vested in any Governmental
Authority to control or regulate any Real Property or interests therein in any
manner, and (v) easements, rights-of-way, and other similar encumbrances
recorded in the public land records and minor irregularities in title which do
not, individually or in the aggregate, (A) interfere in any material respect
with the Business or the present use of or occupancy of the Real Property, (B)
have more than an immaterial effect on the value of the Real Property or its use
or (C) impair the ability of the Real Property to be sold for its present
use.

-6-

     “Person” shall mean any
corporation, partnership (whether general, limited or otherwise), limited
liability company, trust, association, joint venture, unincorporated
organization, governmental entity, agency or branch or department thereof, or
any other legal entity, or any natural person. 

     “Personal Property” shall mean
all right, title, and interest in personal property, tangible and intangible,
owned, leased, held or controlled by the Seller, whether of record or
beneficially, howsoever characterized and wheresoever located, including all
equipment, machinery, motor vehicles, furniture, fixtures, computer hardware,
computer software, intellectual property, data, books, records, Contracts,
agreements, leases, severed Metals, other minerals and timber and all other
personal property and assets and all additions, substitutions, replacements,
accessions and attachments to the foregoing.

     “Post-Closing Straddle Period”
has the meaning specified in Section 5.3(a). 

     “Pre-Closing Straddle Period” has
the meaning specified in Section 5.3(a). 

     “Pre-Closing Tax Period” means a
Tax period ending on or prior to the Closing Date. 

     “Preliminary Disclosure
Schedules” shall have the meaning specified in Section 5.2(a) hereof.

     “Proceeding” shall mean any
action, suit, claim, investigation or proceeding, whether brought before or to
be determined by a Governmental Authority, arbitrator, mediator, other
alternative dispute resolution mechanism or otherwise. 

     “Project” shall mean the gold
mining activities, operations and facilities on or associated with any portion
of the Real Property and the exploration for, drilling for, mining, production,
processing, preparation or sale of gold and other Metals and all reclamation,
investigation, assessment, restoration, mitigation and remediation activities or
requirements associated therewith, including office and administrative
buildings, mine pits, mine openings, air shafts, preparation and processing
plants, adsorption desorption recovery plants, stockpiles, heap leach piles,
waste dumps, underground injection wells, retention and drainage ponds,
unfinished reclamation areas, loading and storage facilities, rail loadout
facilities, wells, drill pads, drill sites, disposal ponds, pipelines,
compressor stations, and other associated facilities.

     “Property Taxes” shall mean ad
valorem, property, excise, severance, production or similar Taxes (including any
interest, fine, penalty or additions to Tax imposed by any Governmental
Authority in connection with such Taxes) based upon operation or ownership of
the Real Property or the production of ores or minerals therefrom but excluding,
for the avoidance of doubt, (a) income, capital gains, franchise Taxes
and similar Taxes and (b) Transfer Taxes.

-7-

     “Purchase Price” shall have the
meaning specified in Section 2.1(b) hereof. 

     “Purchased Membership Interest”
shall have the meaning specified in Section 2.1(a) hereof.

     “Purchaser” shall have the
meaning specified in the preamble hereof, together with its successors and
assigns. 

     “Purchaser Indemnities” shall
have the meaning specified in Section 8.1 hereof. 

     “Real Property” shall mean all
right, title, estate and interest in real property, whether owned, leased, held
or controlled, whether of record or beneficially, howsoever characterized and
wheresoever located, including all fee, surface and mineral estates, fee
interests, patented mining claims, unpatented mining claims, unpatented millsite
claims, tunnel claims, leases water rights, options, tenements, hereditaments,
appurtenances and other interests appertaining, belonging, affixed or incidental
thereto and all rights-of-way, easements, servitudes, access rights and licenses
associated therewith and all additions, substitutions, replacements, accessions
and attachments to the foregoing.

     “Real Property Leases” shall have
the meaning specified in Section 3.7(a)(vii) hereof.

     “Release” shall mean any
emission, spill, seepage, leak, escape, leaching, discharge, injection, pumping,
pouring, emptying, dumping, disposal or other release, whether intentional or
unintentional, of Hazardous Materials from any source (including the real
property and property adjacent to such parcel) into or upon the environment,
including the air, soil, improvements, surface water, groundwater, the sewer,
septic system, storm drain, publicly owned treatment works, or waste treatment,
storage or disposal systems at, on, from, above or under such parcel of real
property or any other property. 

     “Royalties” shall have the
meaning specified in Section 3.7(d).

     “Seller” shall have the meaning
specified in the preamble hereof.

     “Straddle Period” shall mean any
Tax period beginning before, and ending after, the Closing Date.

     “Seller Indemnitees” shall have
the meaning specified in Section 8.2.

     “Seller Income Tax Returns” shall
have the meaning specified in Section 5.3(b).

     “Separate Account Agreement”
means that certain account agreement dated April 16, 2012 between Whitney &
Whitney, Inc., as agent for the Owners, Richard J. Cavell Trust, dated February
23, 1994, Hardrock Mining Company and John Whitney and the Company.

-8-

     “Taxes” or “Tax” (and, with
correlative meanings, “Taxable” or “Taxing”) shall mean, with respect to any
Person, (i) all taxes, charges, fees, duties, levies or other assessments,
however denominated, imposed by any federal, state, local, provincial or foreign
government or any agency or political subdivision of any such government, which
taxes shall include income, gross receipts, net proceeds, license, payroll,
employment, excise, severance, stamp, business, occupation, premium, windfall
profits, environmental, mineral, unmined minerals, abandoned mined land fee,
customs, duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, ad valorem, transfer, registration, value added, advance corporation,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether or not disputed,
with respect to which such Person could be held liable; and (ii) any Liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of (x) being a transferee (within the meaning of Section
6901 of the Code) of another Person, or (y) being a member of an affiliated or
combined group. 

     “Tax Contest” shall mean any
audit, examination, claim, suit, action or other Proceeding relating to Taxes in
which an adjustment to Taxes may be proposed, collected or assessed. 

     “Tax Returns” shall mean all
federal, state, local, provincial and foreign returns, declarations, claims for
refunds, forms, statements, reports, schedules, and information returns or
statements, and any amendments thereof (including any related or supporting
information or Schedule attached thereto) required to be filed with any Taxing
authority in connection with any Tax or Taxes. 

     “Tax Sharing Agreement” means any
written or unwritten agreement or arrangement providing for the allocation or
payment of Tax liabilities or payment for Tax benefits between the Company and
any other Person, other than pursuant to commercially normal provisions of
leases, licenses, loans and similar agreements entered into in the ordinary
course of business.

     “Third-Party Claims” shall mean
any and all Losses which arise out of or result from (i) any claims, suits,
actions, proceedings, liabilities, obligations, losses or damages asserted
against an Indemnitee by any Person not a party hereto, (ii) any rights of any
Person not a party hereto asserted against an Indemnitee, or (iii) any
Liabilities of, or amounts payable by, an Indemnitee to any Person not a party
hereto arising out of clauses (i) or (ii), including claims or actions asserted
against an Indemnitee by any Governmental Authority on account of Taxes and
Environmental Laws; provided, however, that the term “Person” as used for
purposes of this definition of Third-Party Claims shall be deemed to exclude any
Affiliate, partner, director or officer of any party hereto. 

     “Transaction Documents” shall
mean the Transfer Documents, the LLC Agreement, an amendment to the Credit
Agreement, the Transition Services Agreement and such other agreements,
documents and instruments set forth in Schedule 1.1(a) hereto. 

     “Transfer Documents” shall mean
(i) the Membership Interest Assignment, (ii) the unit powers, stock powers,
instruments of transfer and other documents and instruments by which the Seller
shall convey and transfer the Purchased Membership Interest to the Purchaser,
and (iii) such other conveyance documents or instruments as are
necessary or appropriate to convey and transfer the Purchased Membership
Interest to the Purchaser.

-9-

     “Transfer Taxes” shall have the
meaning specified in Section 5.3(e) hereof.

     “Transition Services Agreement”
shall mean that certain Transition Services Agreement of even date herewith
among the Seller, the Company and the Purchaser, substantially in the form of
Exhibit C hereto, whereby the Seller agrees to provide certain services
to the Company after the Closing Date related to the conduct and operations of
the Business and the development and operation of the Project, as amended,
modified, supplemented or restated from time to time. 

     “Valuation and Allocation
Schedule” shall have the meaning specified in Section 5.3(d) hereof.

     1.2 Rules of
Interpretation.

          (a)
The singular includes the plural and the plural includes the singular.

          (b)
The word “or” is not exclusive.

          (c)
References to any Person includes such Person’s successors and assigns, and
reference to a Person in a particular capacity excludes such Person in any other
capacity or individually.

          (d)
The words “include,” “includes” and “including” do not create or imply a
limitation and shall be deemed to be followed by the phrase “without
limitation.”

          (e)
A reference in a document to an Article, Section, Exhibit, Schedule, Annex or
Appendix is to the Article, Section, Exhibit, Schedule, Annex or Appendix of
such document unless otherwise indicated.

          (f)
References to any document, instrument or agreement (i) shall include all
exhibits, schedules and other attachments thereto, (ii) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (iii) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time.

          (g)
The words “hereof,” “herein” and “hereunder” and words of similar import when
used in any document shall refer to such document as a whole and not to any
particular provision of such document.

          (h)
References to “days” shall mean calendar days, unless the term “Business Days”
shall be used.

          (i)
Reference to any applicable Law means, unless specifically provided otherwise,
such applicable Law as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect from time to time, including rules and
regulations promulgated thereunder and reference to any section or other
provision of any applicable Law means, unless specifically provided otherwise, that provision of such
applicable Law from time to time in effect and constituting the substantive
amendment, modification, codification, replacement or reenactment of such
section or other provision.

-10-

          (j)
This Agreement shall be construed in accordance with its fair meaning and shall
not be construed strictly against any Party hereto.

ARTICLE 2
PURCHASE AND SALE; FACILITY FORGIVENESS;
CLOSING

     2.1 Purchase and Sale.

          (a)
Membership Interest. Upon the terms and subject to the conditions of this
Agreement and in reliance on the representations and warranties contained
herein, at the Closing, the Seller shall sell, transfer and assign, and the
Purchaser shall purchase and acquire, Six Million (6,000,000) Class A Units of
the Company, representing sixty percent (60%) of the issued and outstanding
ownership interest in the Company (the “Purchased Membership Interest”), free
and clear of any Lien or restriction, except as set forth in the LLC Agreement.
The further sale or transfer of the Class A Units will be restricted as set
forth in the LLC Agreement, and the Purchased Membership Interest will otherwise
be subject to the terms and conditions of the LLC Agreement.

          (b)
Purchase Price. Against transfer of the Purchased Membership Interest,
and in consideration therefor, on the Closing Date, the Purchaser shall forgive,
cancel and discharge a total of $17,000,000 under the Facility, consisting of
$13,350,000 in principal of the loan together with all additional amounts owing
with respect thereto, which is owed by the Seller and guaranteed by the Company
(the “Purchase Price”), whereupon such amount shall be deemed forgiven,
discharged, settled and satisfied in full.

     2.2 Closing. Subject to
the terms and conditions of this Agreement, the closing of the transactions
contemplated by this Agreement (the “Closing”) will take place at the offices of
Davis Graham & Stubbs LLP on the third (3rd) Business Day after
all of the conditions to Closing set forth herein are either satisfied or waived
(other than conditions which, by their nature, are to be satisfied on the
Closing Date), or at such other time, date or place as the Parties may mutually
agree upon in writing. The Closing shall be effective as of 12:01 a.m. Mountain
time, and the date on which the Closing occurs is referred to herein as the
“Closing Date.”

     2.3 Other Deliveries.
Without limitation by specific enumeration of the foregoing, at the Closing:

          (a)
The Seller shall deliver to the Purchaser certificates (registered in the name
of Holdings or as otherwise designated by Waterton) representing 6,000,000 Class
A Units of the Company, which shall be equal to sixty percent (60%) of the then
issued and outstanding ownership interests in the Company, free and clear of any
Lien or restriction, except as set forth in the LLC Agreement, duly endorsed in
blank or accompanied by unit powers or other instruments of transfer duly
executed in blank;

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          (b)
The Seller shall deliver or cause to be delivered, as the case may be, to the
Purchaser (A) the instruments and certificates required to be delivered by the
Seller pursuant to Article 6 hereof, and (B) such other documents, instruments
and certificates as the Purchaser shall reasonably request for the purpose of
giving effect to the transactions contemplated hereby; and

          (c)
The Purchaser shall deliver or cause to be delivered, as the case may be, to the
Seller (A) the instruments and certificates required to be delivered by the
Purchaser pursuant to Article 7 hereof, and (B) such other documents,
instruments and certificates as the Seller shall reasonably request for the
purpose of giving effect to the transactions contemplated hereby.

     2.4 Simultaneous Closing.
All actions taken at the Closing are to be part of a simultaneous transaction,
and no action is to be considered completed until all actions necessary to be
completed at the Closing have been completed. 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER

     The Seller represents and
warrants to the Purchaser that the statements contained in this Article 3 are
true and correct as of the Closing Date, as follows:

     3.1 Corporate Status and
Authority of the Seller.

          (a)
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. The Seller has full corporate
power and authority to execute and deliver this Agreement and the Transaction
Documents to which it is a party, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Seller of this Agreement and the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Seller, which authorization constitutes all necessary company
action on the part of the Seller for such execution, delivery and performance.
This Agreement has been duly executed and delivered by the Seller and, assuming
valid execution and delivery by the Purchaser, constitutes the valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
referring to or affecting the enforcement of creditors’ rights, or by general
equitable principles. Upon the Closing, the Transaction Documents to which the
Seller is a party shall be duly executed and delivered by the Seller and shall
constitute the valid and binding obligations of the Seller, enforceable against
the Seller in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application referring to or
affecting the enforcement of creditors’ rights, or by general equitable
principles.

          (b)
The Seller has full corporate power and authority to conduct its business and to
own or lease its properties, as presently conducted, owned or leased. The Seller
has all necessary governmental approvals, licenses, Bonds and Permits from
applicable Governmental Authorities to own, lease and contract for the operation of its
properties and to carry on its business as it is now being conducted. The Seller
is duly qualified to do business in each jurisdiction in which the nature of its
business or the location of its assets requires it to be so qualified.
  Schedule 3.1(b) lists each jurisdiction in which the Seller is qualified
to do business.

-12-

     3.2 Organization, Authority
and Qualification of the Company. The Company is a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Nevada and has full company power and authority to own, operate or
lease the properties and assets now owned, operated or leased by it and to carry
on its business as it has been and is currently conducted. Schedule 3.2 sets
forth each jurisdiction in which the Company is licensed or qualified to do
business, and the Company is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business as currently conducted makes such licensing or
qualification necessary. The Company has all necessary governmental approvals,
licenses, Bonds and Permits from applicable Governmental Authorities to own,
lease and operate the Real Property and the Project and to conduct the Business
as it is now being conducted. All company actions taken by the Company in
connection with this Agreement and the other Transaction Documents will be duly
authorized on or prior to the Closing.

3.3 Membership Interest Authorized.

          (a)
The authorized capital of the Company consists of 15,000,000 Class A Units, of
which 10,000,000 Class A Units are issued and outstanding. All of the Class A
Units have been duly authorized, are validly issued, fully paid and
non-assessable, and are owned of record and beneficially by the Seller, free and
clear of any Lien or restriction, except as set forth in the LLC Agreement. Upon
consummation of the transactions contemplated by this Agreement, the Purchaser
shall own all of the Purchased Membership Interest, free and clear of any Lien
or restriction, except as set forth in the LLC Agreement. Other than the Class A
Units, there are no other membership interests or ownership interests in the
Company. As of the Closing Date, the Class A Units are the only measure of a
member’s share of net profit and net loss of the Company.

          (b)
Effective as of the Closing and the consummation of the transactions
contemplated hereby, the authorized capital of the Company will consist of
15,000,000 Class A Units, of which 10,000,000 Class A Units will be issued and
outstanding as fully paid and non-assessable interests in the ownership of the
Company, of which the Purchaser, as of the Closing, will own 6,000,000 shares of
Class A Units and the Seller, as of the Closing, will own 4,000,000 Class A
Units.

          (c)
All of the Class A Units were issued in compliance with applicable Laws. None of
the Class A Units were issued in violation of any agreement, arrangement or
commitment to which the Seller or the Company is a party or is subject to or in
violation of any preemptive or similar rights of any Person. There are no
outstanding or authorized options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character relating to the
Class A Units of the Company or the Company to issue or sell any Class A Units.
Other than the Credit Agreement and related security documents and the LLC
Agreement, there are no voting trusts, member agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Class A Units. Except as set forth in the Credit Agreement and the
Credit Documents (as defined in the Credit Agreement), the Company has not
issued any debt securities which grant the holder thereof any right to vote on,
or veto, any actions by the Company.

-13-

     3.4 No Conflicts, Etc.

          (a)
Charter Documents; Consents; Liens. The execution, delivery and
performance by the Seller of this Agreement and the Transaction Documents and
the consummation of the transactions contemplated hereby and thereby will not
(i) result in any conflict with or violation of the Organizational Documents of
the Seller, (ii) result in any breach or violation of or default under, or give
rise to a right of termination, rescission, acceleration or modification, or
result in the creation or imposition of any Lien under, any statute, regulation,
judgment, order or decree, or any mortgage, deed of trust, indenture, security
agreement, pledge or any other similar instrument to which the Seller or the
Company is a party or by which its properties or assets are bound, (iii) result
in any material breach, violation or default, or give rise to a right of
termination, rescission, acceleration or modification, under any Material
Contract, Permit, Bond or any Real Property Lease, (iv) require the consent,
notice or other action by any Person, including under any Contract (including
Material Contracts and Real Property Leases), Permit or Bond to which the Seller
or the Company is a party or by which the Seller, the Company, the Business or
any Real Property is bound or subject, or (v) result in the creation or
imposition of any Lien other than Permitted Liens on all or any portion of the
Company, its assets or its Real Property.

          (b)
Governmental Consents. Except as set forth in Schedule 3.4(b), no
consent, approval or authorization of or filing with any Governmental Authority
is required on the part of the Seller or the Company in connection with the
execution and delivery of this Agreement and the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby. 

     3.5 Financial Statements.
Schedule 3.5 sets forth audited balance sheets as of, and income
statements and statements of cash flow for the years ending, March 31, 2012,
2011 and 2010 of the Seller and an unaudited balance sheet of the Seller as of
September 30, 2012 (with September 30, 2012 being referred to as the “Balance
Sheet Date” and the unaudited balance sheet as of such date being referred to as
the “Balance Sheet”), together with unaudited income statements and statements
of cash flow for the 6-month period then ended (all of the foregoing being
collectively referred to as the “Financial Statements”). The Financial
Statements have been prepared in accordance with GAAP consistently applied and
in conformity with the books and records and historical practice of the Seller,
and are true and correct in all material respects and present fairly the assets,
liabilities, revenues, expenses and results of operations of the Seller for the
relevant periods to which they relate. 

     3.6 Absence of Undisclosed
Liabilities.

          (a)
Except as set forth on Schedule 3.6, the Company has no Liabilities of
any nature whatsoever other than those that are reflected or reserved against in
the Balance Sheet.

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          (b)
As of the Closing, the Company shall have no monetary debt, obligation or
Liability issued, outstanding or owing to the Seller.

     3.7 Assets.

          (a)
Real Property.

          (i)
Schedule 3.7(a) sets forth a true and complete list of all Real Property
owned, leased, licensed or otherwise held, controlled or used by the Company,
whether of record or beneficially, and such Schedule (i) accurately and
completely describes each portion of the Real Property, (ii) indicates whether
such Real Property is owned, leased, licensed or otherwise held, controlled or
used by the Company, and (iii) describes the Company’s interest therein,
including whether it includes the surface, the minerals, water or other
rights;

          (ii)
The Company is the exclusive owner or lessee of, and has good title to the
unpatented mining claims and millsite claims set forth in Schedule
3.7(a), which ownership and title is, subject to Permitted Liens, superior
and paramount to any adverse claim or right of title which may be rightly
asserted, and subject further only to the paramount title of the United States
and to the rights, if any, of third parties to the lands within such unpatented
mining claims pursuant to the Multiple Mineral Development Act of 1954 and the
Surface Resources and Multiple Use Act of 1955; 

          (iii)
With respect to the unpatented mining claims and unpatented millsite claims
listed on Schedule 3.7(a): (A) the Company is in exclusive possession
thereof, free and clear of all Liens, claims, encumbrances or other burdens on
production, other than Permitted Liens; (B) all such claims were located,
staked, filed and recorded on available public domain land in compliance with
all applicable state and federal laws and regulations; (C) assessment work,
intended in good faith to satisfy the requirements of state and federal laws and
regulations and generally regarded in the mining industry as sufficient, was
timely and properly performed on or for the benefit of the claims, and
affidavits evidencing such work were timely recorded; (D) claim rental and
maintenance fees required to be paid under federal law in lieu of the
performance of assessment work, in order to maintain the claims have been timely
and properly paid, and affidavits or other notices evidencing such payments as
required under federal or state laws or regulation have been timely and properly
filed and recorded; (E) all filings with the Bureau of Land Management with
respect to such claims which are required under the Federal Land Policy and
Management Act of 1976 have been timely and properly made; and (F) there are no
actions or administrative or other proceedings pending or to the best of the
Seller’s knowledge threatened against or affecting any of the claims. In
addition, with respect to each of the unpatented mining claims listed on
Schedule 3.7(a), the Seller represents that, to its knowledge, such
unpatented mining claims have been relocated or remonumented as necessary, and
that evidence of such relocation or remonumentation has been timely and properly
recorded, all in compliance with the provisions of N.R.S. Chapter 517; 

          (iv)
Except as disclosed in Schedule 3.7(a), the Company has valid and
effective rights to its leased property, free and clear of Liens, except for
Permitted Liens;

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          (v)
All taxes, charges, rates, levies and assessments that, if unpaid, would create
a Lien or charge on any Real Property or any portion thereof, have been paid in
full;

          (vi)
All contractors, subcontractors, agents and other Persons providing services,
materials or labour on or for the benefit of any Real Property have been paid in
a timely manner for all work performed or services, goods or labour provided, on
or with respect thereto

          (vii)
Schedule 3.7(a) specifies all Real Property leased or subleased by the
Company (“Leased Real Property”) and describes the leases and subleases related
thereto (the “Real Property Leases”). The Seller has delivered or made available
to the Purchaser true and complete copies of all Real Property Leases. With
respect to the Leased Real Property and the Real Property Leases, except as
otherwise specified on Schedule 3.7(a):

               (A)
Each Real Property Lease is a valid and binding agreement of the Company, and to
the Knowledge of the Seller, each of such other parties thereto in accordance
with its terms, and the Company enjoys peaceful and undisturbed possession of
each Real Property Lease;

               (B)
Except as disclosed on Schedule 3.7(a) the Company is not in material
breach or default under any such Real Property Lease, and to the Knowledge of
the Seller, no event has occurred which, with the passage of time or expiration
of any grace period, would constitute such a material breach or default of the
Company’s obligations under such Real Property Lease, and to the Knowledge of
the Seller, no other party to any such Real Property Lease is in material
default thereunder. Neither the Seller nor the Company has received a written,
or to the Knowledge of the Seller other, notice of default with respect to any
such Real Property Lease;

               (C)
The Company has not subleased, assigned or otherwise granted to any Person the
right to use or occupy such Real Property Lease or any portion thereof;

               (D)
Except for Permitted Liens, no Real Property Lease has been mortgaged, deeded in
trust or subjected to a Lien;

               (E)
Except as specified on Schedule 3.7(a) no Real Property Lease requires
the consent of the lessor to the sale, transfer, conveyance or assignment of the
Company;

               (F)
With regard to the Real Property, the Company has adequate and appropriate legal
rights of ingress and egress to such Real Property and all buildings,
structures, facilities, fixtures and other improvements thereon, including those
easements, licenses, privileges, rights and appurtenances as are necessary to
mine, remove, process and transport any Metals by such methods as currently
conducted; and

-16-

               (G)
Other than Permitted Liens, there are no other matters or conditions that, to
the Knowledge of the Seller, would adversely affect the rights of the Company to
the Real Property. 

          (viii)
Schedule 3.7(a) specifies all Real Property owned by the Seller (“Owned
Real Property”), including the record title holder of the Owned Real Property.
With respect to each such parcel of the Owned Real Property, except as otherwise
specified on Schedule 3.7(a):

               (A)
The Company has adequate and appropriate legal rights of ingress and egress to
such Owned Real Property and all buildings, structures, facilities, fixtures and
other improvements thereon, including those easements, licenses, privileges,
rights and appurtenances as are necessary to mine, remove, process and transport
any Metals by such methods as currently conducted;

               (B)
There are no pending, or to the Knowledge of Seller, threatened condemnation or
expropriation proceedings, lawsuits or administrative actions or any other
material matters adversely affecting the current and contemplated use, occupancy
or value of the Owned Real Property;

               (C)
No material Owned Real Property serves any adjoining property for any purpose
inconsistent with the use of the Owned Real Property;

               (D)
There are no leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any Person the right of use or occupancy of any
portion of the Owned Real Property;

               (E)
No tenant, lessee or other Person in possession of any Owned Real Property has
any option or right to purchase or holds any right of refusal to purchase any
such properties;

               (F)
Other than Permitted Liens, there are no other matters or conditions that, to
the Knowledge of the Seller, have had or would reasonably be expected to have a
Material effect on the Owned Real Property or the use thereof. 

          (ix)
The Seller has provided to the Purchaser, to the extent requested, the following
data and information related to any portion of the Real Property: geological
data, reserve data, existing mine maps, surveys, core hole logs and associated
data, minerals measurements, mineral sample data, lithologic data, reserve
calculations or reports, mine plans, mine plan maps, mining permit applications
and supporting data, engineering studies, reclamation reports and all other
books and records, information, maps, reports and data.

          (x)
There does not exist any pending or, to the Knowledge of the Seller, threatened
condemnation action or any other action by a Governmental Authority to impose or
enforce any land use or land use restriction that would reasonably be expected
to materially affect or materially impair the present or proposed use or
operation of the Real Property.

-17-

          (xi)
All material buildings, structures and other improvements located upon the Real
Property are in working order and repair (normal wear and tear excepted), have
been operated and maintained in the Ordinary Course of Business consistent with
prudent mining industry standards and are in suitable and adequate condition for
use consistent with past practices and prudent mining industry practices.

          (b)
Personal Property.

          (i)
All Personal Property (other than ore and Metals that have been extracted) owned
or leased by the Company that (i) in the case of any such owned property, has a
net book value as of the Balance Sheet Date of Fifty Thousand Dollars
($50,000.00) or more, or (ii) in the case of any such leased property, requires
aggregate annual payments by the Seller in excess of Fifty Thousand Dollars
($50,000.00), is listed on Schedule 3.7(b). 

          (ii)
Each lease of Personal Property is in full force and effect as against the
Company and, to the Knowledge of the Seller, as against each other party
thereto, and the Company is, and at all times has been, in compliance in all
material respects with all terms and conditions of each such lease. There is no
existing material breach or default by the Company under any such lease, or, to
the Knowledge of the Seller, there is no existing material breach or default by
any other party thereto. Except as set forth on Schedule 3.7(b) hereof,
the Company has neither committed nor received written notice of any act or
omission that constitutes or, with the passage of time or the giving of notice
or both, would constitute a material violation of or default under any such
lease, and the Seller has not granted to any Person a security interest in the
leasehold interest in any such lease. True and complete copies of each lease of
Personal Property have been delivered to the Purchaser.

          (c)
Intellectual Property. The Company has no owned or licensed intellectual
property (including patents, patent applications, trademarks, service marks,
trade names, copyrights and know-how) that is material to the Company or the
ownership or operation of the Project or the Business.

          (d)
Royalties. Set forth on Schedule 3.7(d) is a true and complete
list of all royalties (of any type and nature, and howsoever characterized)
payable on or from the production or sale of Metals from the Real Property (the
“Royalties”), including an accurate identification of the properties from which
such royalties are payable, the type of royalty and the percentage interest of
such royalty. Except as set forth on Schedule 3.7(d), the Company has
fully, timely and properly paid all such Royalties and neither the Seller nor
the Company has received any unresolved notice of default, notice of nonpayment
or notice of audits in connection with the payment of such Royalties.

          (e)
Reserves. Schedule 3.7(e) sets forth the most recent internal
estimates of the Seller’s reserves, which are believed to be economically
recoverable by existing production methods under current economic conditions,
including a calculation of such amounts and a description of the methodology
used to determine such reserves. While the estimates set forth in Schedule
3.7(e) have been relied upon by the Seller and the Company in the conduct of
their own affairs, they are “forecasts” within the meaning of Section
3.20 of this Agreement and do not constitute a representation or warranty that
such reserves will be actually recoverable.

-18-

     3.8 Material
Contracts.

          (a)
Schedule. Schedule 3.8(a) lists all written Contracts of the
following types to which the Company is a party or by which the Company is bound
or by which the Project or the Real Property are bound or to which the Project
or the Real Property are subject (collectively, the “Material Contracts”):

          (i)
Any Real Property Lease;

          (ii)
Any guaranty of or bond, surety, insurance or other performance guaranty given
to or held in favor of, the Company or that benefit the Project or any portion
of the Real Property;

          (iii)
Any guaranty, bond, surety, insurance, letter of credit, trust account, deposit
account, blocked account or other arrangement that benefit the Company, the
Project or any portion of the Real Property or that are entered into in
connection with any dispute or litigation related to the Company, the Project or
any portion of the Real Property, including the Separate Account Agreement;

          (iv)
Any joint venture agreement, limited liability company operating agreement or
general or limited partnership agreement;

          (v)
Any mortgage, deed of trust, loan or trust indenture, loan or credit agreement,
security agreement and other agreements and instrument relating to the borrowing
of money;

          (vi)
Any corporate guarantee provided directly by the Company of any obligations of
any of its Affiliates or any other Person to the extent such guarantee relates
to an Assumed Liability;

          (vii)
Any letter of credit, surety bond or other credit support instrument issued by
any insurance company, bank or other financial institution for the account or
benefit of the Company;

          (viii)
Any agreement for the (A) sale, lease, sublease or other disposition of any Real
Property, (B) any option agreement, right of first refusal, right of first offer
or other right or preference by or in favor of any Person with respect to any
Real Property, or (C) purchase or lease by the Company of any Real Property that
is not otherwise listed on Schedule 3.8(a); 

          (ix)
Any agreement for the (A) sale of any Personal Property listed on Schedule
3.7(b), or (B) lease to any Person of any Personal Property listed on
Schedule 3.7(b) or any lease for Personal Property requiring an aggregate
payment by the Seller of Fifty Thousand Dollars ($50,000) or more in any single
year;

-19-

          (x)
Any agreement providing for the employment of any Person, as an officer,
employee or consultant, with annual salary or bonus payments aggregating in
excess of Seventy Thousand Dollars ($70,000);

          (xi)
Any agreement providing for the payment or receipt of license fees, commissions
or royalties to or from any Person in excess of Fifty Thousand Dollars ($50,000)
annually that is not listed in Schedule 3.7(d);

          (xii)
Any collective bargaining agreements or agreements that contain any severance
pay liabilities or obligations (other than general corporate policies or
practices);

          (xiii)
Any bonus, deferred compensation, pension, profit-sharing, stock option or
purchase plans, retirement retainer, or incentive plans, or other material
employee benefit plans or agreements other than as provided on Schedule
3.8(a);

          (xiv)
Any non-competition agreement, area of mutual interest agreement or other
agreement limiting the freedom of the Company or its Affiliates to compete in
any line of business, or in any area, or with any Person, or to acquire any Real
Property or interest therein, or that in any way limits or restricts the ability
of the Company to engage in any business or to acquire any property;

          (xv)
Any agreement with a Governmental Authority; 

          (xvi)
Any agreement that provides for the indemnification of any Person or the
assumption of any Tax, environmental or other Liability of any Person; and

          (xvii)
Any other agreements, contracts and commitments which are not of a type referred
to in Paragraphs (i) through (xv) above and are material to the Company or the
operation of the Business, or have a term of one (1) year or more and require
payment or provide for the receipt by the Company after the date hereof of more
than Fifty Thousand ($50,000).

          (b)
Effectiveness. True and complete copies of all Material Contracts have
been provided to the Purchaser. Except as set forth on Schedule 3.8(b),
each Material Contract is valid and binding and in full force and effect in
accordance with its terms as against the Company and, to the Knowledge of the
Seller, is valid and binding as to the other parties thereto, except as may be
limited by laws affecting bankruptcy, insolvency, reorganization, moratorium or
creditors rights generally, or by general equitable principles. Except as set
forth on Schedule 3.8(b), the Company is not in breach or default in the
payment or performance or observance of, and the Company has not received
written notice of, any act or omission on the part of the Company that
constitutes or, with the passage of time or the giving of notice or both, would
constitute a default under, any Material Contract. Except as set forth on
Schedule 3.8(b), the Company has not delivered any unresolved notice of
breach or default to any other party to a Material Contract, and, to the
Knowledge of the Seller, no other party is in breach or default in the payment
or performance or observance of any term or condition of any Material Contract.
No event has occurred which with notice or lapse of time could constitute a
breach of or default by the Company under any Material Contract, or to the
Knowledge of the Seller, by any other party to such agreement, or that would permit termination,
modification, acceleration or other changes of any right or obligation or the
loss of any benefit under any Material Contract. The Seller has no Knowledge
that any Person intends to terminate or rescind any Material Contract prior to
the expiration of its stated term.

-20-

     3.9 Affiliate
Arrangements. Except as set forth in Schedule 3.9, the Company is not
a party to or bound by any Contract, whether or not in the Ordinary Course of
Business, with the Seller or any Seller Affiliate, including with respect to
loans, guaranties, service agreements, consulting agreements, management
agreements, employment agreements, contract mining, equipment leasing, property
leasing, office leasing, permit use, surety arrangements, or other business
arrangements, and there are no outstanding liabilities, accrued or unaccrued
expenses, accrued or unaccrued accounts payable or receivable, advances,
payments, Tax-Sharing Agreements or other obligations between the Company, on
the one hand, and the Seller, on the other hand.

     3.10 Governmental
Authorizations, Compliance with Law.

          (a)
Permits. Set forth on Schedule 3.10(a) is a complete and accurate
list of all licenses, permits, registrations, jurisdictional determinations,
mitigation plans, waivers and other governmental authorizations and approvals
that are necessary for, or held by the Company or the Seller for, the ownership
or operation of the Company, the Project or the Business (the “Permits”) in each
case setting forth the name of the grantor, the name of the grantee, the
expiration and renewal date and the amount of bonding obligation with respect to
each Permit. Each such Permit has been validly issued, is in full force and
effect, and is final, and to the Knowledge of the Seller, no event has occurred
that constitutes or, with the giving of notice, the passage of time, or both,
would constitute a breach or default under any such Permit. All fees and other
payments due and owing in connection with such Permits have been paid in full
and in a timely manner so as to prevent any lapse, revocation or material breach
of such Permit.

          (b)
Compliance with Permits. The Company has developed and operated the
Project and conducted the Business in compliance in all material respects with
all Permits. Except as set forth on Schedule 3.10(b), there is no pending
or, to the Knowledge of the Seller, threatened application, petition, complaint,
challenge, objection or other pleading or notice of violation or potential
liability from any Governmental Authority or third party which challenges or
questions the validity of any material rights or operations of the holder under
any issued Permit or any Permit application. Except as set forth on Schedule
3.10(b), no Proceeding by any Governmental Authority or third party has been
instituted since January 1, 2007 or, to the Knowledge of the Seller is
threatened, seeking the suspension, termination, or revocation, or material
modification, alteration or amendment, of any Permit or to declare any Permit
invalid in any material respect or, to the Knowledge of the Seller, seeking the
suspension or termination of the Project or any portion thereof. Except as set
forth on Schedule 3.10(b), neither the Seller nor the Company has
received any written notice of material noncompliance with respect to any Permit
that remains open or unresolved.

          (c)
Permit Applications. There are no applications for Permits to be issued
by a Governmental Authority with respect to the Business or the Project other
than those set forth on Schedule 3.10(c) (the “Applications”). Each
Application has been made in a timely fashion in accordance with applicable Laws. Neither the Seller nor the
Company has received any communication from the applicable permitting authority
with respect to any Application that indicates that such Application has been or
will be denied.

-21-

          (d)
Bonds. All deposits, letters of credit, certificates of deposit, trust
funds, surety accounts, bid bonds, performance bonds, reclamation bonds, surety
bonds and other financial surety (and all such similar undertakings) required to
be provided or posted in connection with the Company, the Project, the Business
and the Permits are described on Schedule 3.10(d) (the “Bonds”), and all
such Bonds have been posted or provided in full and are in full force and
effect. The Bonds are sufficient to own and operate the Project and to conduct
the Business in material compliance with the Permits and Laws. The Company and
the Project are and have been in compliance in all material respects with all
Bonds applicable thereto. No Proceeding by any Governmental Authority or third
party has been instituted or, to the Knowledge of the Seller is threatened,
seeking the suspension, termination, or revocation, or material modification,
alteration or amendment, of any Bond or to declare any Bond invalid in any
material respect. The Company and the Project, and the state of reclamation with
respect thereto, are “current” or in “deferred status” regarding reclamation
obligations and otherwise are and have been in compliance in all material
respects with Laws relating to reclamation.

          (e)
Compliance with Laws. The Company, the Project and the Business have
complied and are currently complying, in all material respects, with all Laws
and Permits.

          (f)
Violations. To the Knowledge of the Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (i) may
constitute or result in a material violation by the Company of any Law or
Permit, (ii) may constitute or result directly or indirectly in a violation of
or a failure to comply with any material term or requirement of, or result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
non-renewal, termination of or modification to, or result in the imposition of
any new condition on, any Permit, or (iii) may give rise to any obligation on
the part of the Company or any owner of the Project or the Business to
undertake, or to bear all or any portion of the cost of, any remedial action of
a material nature.

          (g)
Notice of Violations. Neither the Seller nor the Company has received any
notice or other written communication, or to the Knowledge of the Seller any
oral communication, from any Governmental Authority or other Person regarding
(i) any actual, alleged, possible or potential violation or, or failure to
comply in any material respect with, any Law or Permit, (ii) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, non-renewal, termination or modification of any Permit, or (iii)
any actual, alleged, possible or potential obligation on the part of the Company
to undertake or to bear all or any portion of the cost of any remedial action of
a material nature.

     3.11 Litigation;
Proceedings.

          (a)
Except as set forth in Schedule 3.11(a), there is no Proceeding pending
or, to the Knowledge of the Seller, threatened against or involving or affecting
the Company, the Closing, the Business, the Project, any Permit, or any portion
of any of the foregoing. None of the Proceedings listed on Schedule
3.11(a), if adversely determined, would reasonably be expected to involve, individually or in the aggregate, an award
of damages in excess of $100,000.

-22-

          (b)
Schedule 3.11(b) sets forth a list of each outstanding Governmental Order
of any Governmental Authority against or materially affecting the Company or any
of its properties requiring the payment of damages or, in the case of an
injunction that if not obeyed, would impair, delay or suspend any operation or
activity related to the Project or the Business. The Company is in compliance
with all of the terms and requirements of each Governmental Order, and no event
or circumstance exists that may constitute or result in (with or without notice
or lapse of time) a violation of or failure to comply with any Governmental
Order.

          (c)
To the Knowledge of the Seller, there are no existing claims or disputes between
the Company and any Person owning, leasing, controlling, occupying or operating
lands or realty adjoining or near any of the Project or with respect to adverse
possession, the location of boundary lines, encroachments, mineral rights,
subsidence, water quality or quantity, flood damage, blasting damage, dust
damage, trespass, access rights, transportation of Metals or other materials,
waste, nuisance or other similar claims or matters.

          (d)
As of the Closing Date, the account established pursuant to, and governed by,
the Separate Account Agreement has total funds on deposit of $ $859,334.07.

     3.12 Taxes. Except as set
forth in Schedule 3.12:

          (a)
The Company has duly and timely filed, or caused to be duly and timely filed
(taking into account any valid extensions) all Tax Returns required to be filed
by the Company (or the Seller with respect to income or operations of the
Company). Such Tax Returns are true, complete and correct in all material
respects and were prepared in material compliance with all applicable Laws. The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. All material Taxes (whether or not shown to be due on
any Tax Return) due and owing with respect to the Company have been timely paid
or properly accrued upon the books of the Company. Schedule 3.12 sets
forth a schedule of the Tax Returns referred to in this clause (a) with respect
to which neither the appropriate taxing authority has completed its examination
(with all issues finally resolved) nor the period for assessment of the
associated Taxes (taking into account all applicable extensions and waivers) has
expired. The unpaid Taxes of the Company did not as of December 31, 2012 exceed
the cumulative reserve for Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the annual financial statements of the Company (or its predecessors) for the
calendar year ending December 31, 2012 (rather than in any notes thereto). The
Company has not incurred any liability for Taxes since December 31, 2012, other
than in the ordinary course of business. All deficiencies asserted or
assessments made as a result of any examination of such Tax Returns have been
paid in full.

          (b)
There is no unsatisfied liability for Taxes outstanding, proposed in writing or
assessed against the Company (or the Seller with respect to income, gains or
operations of the Company). No extensions or waivers of statutes of limitations
have been given or requested with respect to any Taxes of the Company.

-23-

          (c)
Neither the Seller nor the Company has received written notice of an ongoing,
pending, proposed or threatened Claim or other legal proceeding by any taxing
authority against the Company or any request for information relating to Tax
matters and to the Knowledge of the Seller, there are no pending or threatened
Claims or other legal proceedings by a tax authority.

          (d)
No written Claim has ever been made by a taxing authority in a jurisdiction
where the Company has never paid Taxes or filed Tax Returns asserting that the
Company is, may be or was subject to Taxes assessed by such jurisdiction or
filing Tax Returns in such jurisdiction.

          (e)
No private letter rulings, offer in compromise, settlement agreements, closing
agreements, ruling requests, notices of proposed deficiency, technical advice
memoranda or similar agreements, rulings, or correspondence have been requested
from, entered into with or issued by any taxing authority with respect to or in
relation to the Company (or the Seller with respect to income, gains or
operations of the Company).

          (f)
The Company is not a party to any Tax Sharing Agreement, Tax indemnity
agreement, closing agreement, settlement agreement, or offer in compromise with
any taxing authority.

          (g)
There are no Liens (other than Permitted Liens) for Taxes upon the assets of the
Company or any portion thereof.

          (h)
The Company has materially complied with all applicable Laws, rules and
regulations relating to the withholding of Taxes and all material Taxes that the
Company has been required to collect or withhold for any employee, independent
contractor, creditor, stockholder or other party thereunder, have been duly and
timely deducted, withheld or collected and, to the extent required, have been
paid to the proper Taxing authority.

          (i)
The Company has not been a member of an “affiliated group” (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) or any other group of corporations that, at any
time on or before the Closing Date, files or has filed Tax Returns on a
combined, consolidated or unitary basis with the Company or any predecessor or
successor to the Company, other than (in each case) a group of which Seller is
the common parent corporation. The Company has no liability for Taxes of any
other Person under Section 1.1502 -6 of the income tax regulations promulgated
under the Code (or any corresponding provision of state, local or foreign Law),
as transferee or successor, by Contract or otherwise.

          (j)
The Company has been a party to any transaction (other than a transaction
described in Section 355(e)(2)(C) of the Code) within the last two (2) years
treated by the parties thereto as one to which Section 355 of the Code (or any
similar provision of state, local or foreign Law) applied.

          (k)
No transaction contemplated by this Agreement is subject to withholding under
Section 1445 of the Code.

-24-

          (l)
The Company has not agreed to make, nor are they required to make, any
adjustment under Sections 481(a) or 263A of the Code or any comparable provision
of state, local or foreign Tax laws by reason of a change in accounting method
or otherwise. The Company has not taken any action that would result in a
liability for Taxes in any Post-Closing Tax Period as a result of (i) a change
in method of accounting for any Pre-Closing Tax Period, (ii) an installment sale
or open transaction disposition made on or prior to the Closing Date, (iii) a
prepaid amount received on or prior to the Closing Date, (iv) the completed
contract method of accounting or the long-term contract method of accounting,
(v) any income that has economically accrued in a Pre-Closing Tax Period, (vi)
any agreement with any taxing authority with respect to a Pre-Closing Tax
Period, or (vii) any intercompany transactions.

          (m)
The Company is not and has not been a party to, or promoters of, a “reportable
transaction” within the meaning of Section 6111 of the Code or a Section 1.6011
-4 of the income tax regulations promulgated under the Code.

          (n)
No power of attorney that is currently in force has been granted to any Person
with respect to any matter relating to Taxes that could affect the Company.

          (o)
No holder or prior holder of any interest in the Company has any claim
(contractual or otherwise) for any dividend or distribution from the Company as
a result of the pass-through to such holder of any income or gain of the Company
under the Code or otherwise with respect to any Pre-Closing Tax Period or
Pre-Closing Straddle Period.

          (p)
The Seller is not a “foreign person” as defined in Section 1445(f)(3) of the
Code.

          (q)
Since September 30, 2012, the Company has not (i) changed a method of accounting
for Tax purposes, (ii) entered into any agreement with any taxing authority
(including a “closing agreement” under Code Section 7121) with respect to Taxes,
(iii) changed an accounting period with respect to Taxes, (iv) filed any amended
Tax Return, or (v) made, changed or revoked any material election with respect
to Taxes.(r) The Company is, and immediately prior to Closing will be, a
disregarded entity for federal and applicable state income Tax purposes.

     3.13 Absence of Changes.
Since September 30, 2012, the Company has conducted the Business and operated
and maintained its assets and performed, paid and discharged its Liabilities
only in the Ordinary Course of Business, and no events or conditions have
occurred or been discovered that could reasonably be expected to have a Material
Adverse Effect on the Company, the Project or the Business, except as set forth
in Schedule 3.13. In addition, except as set forth on Schedule
3.13, since September 30, 2012, the Company has not:

          (a)
Incurred any Liabilities or obligations, except Liabilities and obligations
incurred in the Ordinary Course of Business;

          (b)
Discharged or satisfied any Lien, or paid any obligation or Liability (absolute
or contingent), other than Liabilities due and payable in the Ordinary Course of
Business or to be discharged or satisfied in connection with
the transactions contemplated by this Agreement;

-25-

          (c)
Changed any accounting practice followed or employed in preparing the Financial
Statements or otherwise;

          (d)
Increased the compensation (including salary, bonuses, special compensation,
severance or termination pay) or benefits of any officer or employee;

          (e)
Incurred any long-term indebtedness other than pursuant to the Credit
Agreement;

          (f)
Disposed of, sold, leased, transferred or assigned, or agreed to dispose of,
sell, lease, transfer or assign, any properties, contracts or assets having a
net book value as of the date of such disposition, individually or in the
aggregate, in excess of One Hundred Thousand Dollars ($100,000.00), other than
in the ordinary course of business;

          (g)
Declared, set aside or paid any dividend, distribution, or payment on or with
respect to, or issued, sold, purchased or redeemed, any shares or ownership
interests or made any commitment therefore, other than distributions by Borealis
Mining Company in the Ordinary Course of Business;

          (h)
Canceled, waived or forgiven any debts, rights or claims therefor in excess of
Fifty Thousand Dollars ($50,000.00), individually or in the aggregate; 

          (i)
Entered into any transaction for the purchase or sale of goods or services in
excess of One Hundred Thousand Dollars ($100,000.00), other than in connection
with the transactions contemplated by this Agreement; or

          (j)
Revalued any of its assets, including write-downs of inventory or write-offs of
accounts receivable, other than in the Ordinary Course of Business.

     3.14 Environmental
Compliance.

          (a)
Except as disclosed in Schedule 3.14(a), the Company is in compliance in
all material respects with all applicable Environmental Laws, and the Project is
in compliance in all material respects with all applicable Environmental Laws.
Except as disclosed in Schedule 3.14(a), neither the Company nor the
Seller has received any written notice of, and to its Knowledge has not been
threatened with, any violation, hearing, consent order, corrective action order,
cessation order, notice of fine, demand, information request, or penalty, notice
of proposed assessment, notice of potential Liability, notice of investigation
or other written notice from any Governmental Authority or third party that the
Company or any Project is not in compliance with or may have some Liability
under any Environmental Laws or Permits or that any Real Property may be subject
thereto.

          (b)
Except as disclosed in Schedule 3.14(b), there has been no Release of
Hazardous Materials on, in, under, over or in any way affecting the Real
Property or any portion of the Project, except in accordance with a valid Permit or
otherwise in accordance with Environmental Laws.

-26-

          (c)
Except as disclosed in Schedule 3.14(c), none of the Real Property is or
has been used to produce, manufacture, process, generate, store, use, handle,
recycle, treat, dispose of, manage, ship or transport Hazardous Materials, other
than pursuant to a valid Permit or in compliance with applicable Law.

          (d)
Except as disclosed in Schedule 3.14(d), none of the Real Property
contains or has contained any underground or above ground storage tanks and no
underground or above ground storage tanks have been removed by or on behalf of
the Company from such property.

          (e)
Neither the Seller nor the Company has received written notice from any
Governmental Authority or any other Person that the Company or the Project (or
any portion thereof) is, or is alleged to be, a “potentially responsible party”
under CERCLA, or in violation of RCRA, CWA or any Environmental Laws. The
Company is not undertaking any investigation or remediation, whether voluntary
or under a Governmental Order, relating to any Release of Hazardous Materials,
and the Project is not subject to any investigation, assessment or remediation,
whether voluntary or under a Governmental Order, relating to any Release of
Hazardous Materials on or from any portion of the Real Property.

          (f)
In all instances where Hazardous Materials are disposed of, treated or stored by
the Company or which the Company has permitted to be disposed of, treated or
stored on any Real Property as identified in Schedule 3.14(c), and to the
Knowledge of the Seller all Hazardous Materials disposed of, treated or stored
with respect to the Business and the Project, have in each case been disposed
of, treated or stored, as the case may be, in material compliance with all
applicable Laws.

          (g)
Neither the Seller nor the Company is aware of or reasonably anticipates, as of
the Closing Date, any condition, event or circumstance concerning the Release or
regulation of Hazardous Materials that might, after the Closing Date, prevent,
materially impede or materially increase the costs, associated with the
ownership, lease, operation, performance or use of the Project, the Real
Property, or the Business of the Company, as currently conducted.

     3.15 Insurance.
Schedule 3.15 contains a true and complete list of all policies of fire,
property and casualty, liability, workers’ compensation, business interruption
and other forms of insurance policies (other than surety or performance bond
policies) in effect on the date hereof and maintained by or provided for the
benefit of the Company, including policies under which the Company is listed as
a co-insured, additional insured or loss payee, but excluding any policies
listed in Schedule 3.19. All such policies are in full force and effect
on the date hereof, and will continue to be after the Closing, and all premiums,
assessments and other charges required thereunder have been paid when due. To
the Knowledge of the Seller, there are no denials of coverage or disputes with
respect to such policies. The Seller has provided to the Purchaser copies of all
policies of insurance set forth on Schedule 3.15. Such insurance policies
are in full force and effect and shall remain in full force and effect following
the consummation of the transactions contemplated by this Agreement. Neither the
Seller nor any of its Affiliates (including the Company) has received any written notice of
cancellation of, premium increase with respect to, or alteration of coverage
under, any of such Insurance Policies. All premiums due on such insurance
policies have either been paid or, if due and payable prior to Closing, will be
paid prior to Closing in accordance with the payment terms of each Insurance
Policy. The Insurance Policies do not provide for any retroactive premium
adjustment or other experience-based liability for prior periods on the part of
the Company. All such insurance policies (a) are valid and binding in accordance
with their terms; (b) are provided by carriers who are financially solvent; and
(c) have not been subject to any lapse in coverage. Except as set forth on
Schedule 3.15, there are no claims related to the business of the
Company pending under any such Insurance Policies as to which coverage has been
questioned, denied or disputed or in respect of which there is an outstanding
reservation of rights. None of the Seller or any of its Affiliates (including
the Company) is in default under, or has otherwise failed to comply with, in any
material respect, any provision contained in any such Insurance Policy. The
Insurance Policies are sufficient for compliance with all applicable Laws and
Contracts to which the Company is a party or by which it is bound.

-27-

     3.16 Bank Accounts.
Schedule 3.16 contains a correct and complete list of the names of each
bank or other financial institution in which the Company has an account
(including lockbox accounts) or safe deposit box, and the names of all persons
authorized to draw thereon or to have access thereto.

     3.17 Employment
Matters.

          (a)
Schedule 3.17 contains a list of all persons who are employees,
independent contractors or consultants of the Company as of the date hereof, and
sets forth for each such individual the following: (i) name; (ii) title or
position (including whether full or part time); (iii) current annual base
compensation rate; (iv) commission, bonus or other incentive-based compensation;
and (v) a description of the fringe benefits provided to each such individual as
of the date hereof. Except as set forth in Schedule 3.17, as of the date
hereof, all compensation, including wages, commissions and bonuses, payable to
employees, independent contractors or consultants of the Company for services
performed on or prior to the date hereof have been paid in full and there are no
outstanding agreements, understandings or commitments of the Company with
respect to any compensation, commissions or bonuses.

          (b)
Except as set forth in Schedule 3.17, the Company is not, and has not
been for the past five years, a party to, bound by, or negotiating any
collective bargaining agreement or other Contract with a union, works council or
labor organization (collectively, “Union”), and there is not, and has not been
for the past five years, any Union representing or purporting to represent any
employee of the Company, and, to the Seller's Knowledge, no Union or group of
employees is seeking or has sought to organize employees for the purpose of
collective bargaining. Except as set forth in Schedule 3.17, there has
never been, nor has there been any threat of, any strike, slowdown, work
stoppage, lockout, concerted refusal to work overtime or other similar labor
disruption or dispute affecting the Project, the Company or any of its
employees. The Company has no duty to bargain with any Union.

          (c)
The Company is and has been in compliance in all material respects with all
applicable Laws pertaining to employment and employment practices, including all
Laws relating to labor relations, mine, safety and health
protection, equal employment opportunities, fair employment practices,
employment discrimination, harassment, retaliation, reasonable accommodation,
disability rights or benefits, immigration, wages, hours, overtime compensation,
child labor, hiring, promotion and termination of employees, working conditions,
meal and break periods, privacy, health and safety, workers' compensation,
leaves of absence and unemployment insurance. All individuals characterized and
treated by the Company as independent contractors or consultants are properly
treated as independent contractors under all applicable Laws. All employees
classified as exempt under the Fair Labor Standards Act and state and local wage
and hour laws are properly classified in all material respects. Except as set
forth in Schedule 3.17, there are no Proceedings against the Company
pending, or to the Seller's Knowledge, threatened to be brought or filed, by or
with any Governmental Authority or arbitrator in connection with the employment
of any current or former applicant, employee, consultant or independent
contractor of the Company, including, without limitation, any claim relating to
unfair labor practices, employment discrimination, harassment, retaliation,
equal pay, wage and hours or any other employment related matter arising under
applicable Laws.

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          (d)
The Company has complied in all material respects with the WARN Act and it has
no plans to undertake any action in the future that would trigger the WARN
Act.

          (e)
The employees, consultants, and independent contractors listed on Schedule
3.17 constitute all such employees, consultants, and independent contractors
working at and on the Project, and each such person is employed or engaged by
the Company.

     3.18 Suppliers.
Schedule 3.18 sets forth a list of the top ten (10) suppliers of the
Company (determined on the basis of cost of items purchase for each of the last
two (2) fiscal years). No supplier set forth on Schedule 3.18 has ceased
or materially reduced its supply of materials or goods or provision of services
to the Company since December 31, 2011, or to the Knowledge of the Seller, has
threatened to cease or materially reduce such supply or provision after the date
hereof, other than as set forth in Schedule 3.18. To the Knowledge of the
Seller, no such supplier is currently in, or threatened with, bankruptcy or
insolvency.

     3.19 Employee Benefit Plans
and Matters.

          (a)
Schedule 3.19 contains a true and complete list of each pension, benefit,
retirement, compensation, profit-sharing, deferred compensation, incentive,
performance award, phantom equity, stock or stock-based, change in control,
retention, severance, vacation, paid time off, fringe-benefit and other similar
agreement, plan, policy, program or arrangement (and any amendments thereto), in
each case whether or not reduced to writing and whether funded or unfunded,
including each “employee benefit plan” within the meaning of Section 3(3) of
ERISA, whether or not tax-qualified and whether or not subject to ERISA, which
is or has been maintained, sponsored, contributed to, or required to be
contributed to by the Company for the benefit of any current or former employee,
officer, director, retiree, independent contractor or consultant of the Company
or any spouse or dependent of such individual, or under which the Company has or
may have any Liability, or with respect to which the Purchaser or any of its
Affiliates would reasonably be expected to have any Liability, contingent or
otherwise (as listed on Schedule 3.19, each, a “Benefit Plan”).

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          (b)
With respect to each Benefit Plan, the Seller has made available to the
Purchaser accurate, current and complete copies of each of the following: (i)
where the Benefit Plan has been reduced to writing, the plan document together
with all amendments; (ii) where the Benefit Plan has not been reduced to
writing, a written summary of all material plan terms; (iii) where applicable,
copies of any trust agreements or other funding arrangements, custodial
agreements, insurance policies and contracts, administration agreements and
similar agreements, and investment management or investment advisory agreements;
(iv) copies of any summary plan descriptions, summaries of material
modifications, employee handbooks and any other written communications (or a
description of any oral communications) relating to any Benefit Plan; (v) in the
case of any Benefit Plan that is intended to be qualified under Section 401(a)
of the Code, a copy of the most recent determination, opinion or advisory letter
from the Internal Revenue Service; (vi) in the case of any Benefit Plan for
which a Form 5500 is required to be filed, a copy of the most recently filed
Form 5500, with schedules attached; (vii) actuarial valuations and reports
related to any Benefit Plans with respect to the two most recently completed
plan years; and (viii) copies of material notices, letters or other
correspondence from the Internal Revenue Service, Department of Labor or Pension
Benefit Guaranty Corporation relating to the Benefit Plan.

          (c)
Except as set forth in Schedule 3.19, each Benefit Plan (other than any
multi-employer plan within the meaning of Section 3(37) of ERISA (each a
“Multi-employer Plan”)) has been established, administered and maintained in
accordance with its terms and in compliance with all applicable Laws (including
ERISA and the Code). Each Benefit Plan that is intended to be qualified under
Section 401(a) of the Code (a “Qualified Benefit Plan”) is so qualified and has
received a favorable and current determination letter from the Internal Revenue
Service, or with respect to a pre-approved plan, can rely on an opinion or
advisory letter from the Internal Revenue Service to the prototype plan sponsor,
to the effect that such Qualified Benefit Plan is so qualified and that the plan
and the trust related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and nothing has occurred
that could reasonably be expected to cause the revocation of such, opinion or
advisory letter from the Internal Revenue Service, as applicable, nor has such
revocation or unavailability been threatened. To the Knowledge of the Seller,
nothing has occurred with respect to any Benefit Plan that has subjected or
could reasonably be expected to subject the Company or, with respect to any
period on or after the Closing Date, the Purchaser or any of its Affiliates, to
a penalty under Section 502 of ERISA or to tax or penalty under Section 4975 of
the Code. Except as set forth in Schedule 3.19, all benefits,
contributions and premiums relating to each Benefit Plan have been timely paid
in accordance with the terms of such Benefit Plan and all applicable Laws and
accounting principles, and all benefits accrued under any unfunded Benefit Plan
have been paid, accrued or otherwise adequately reserved to the extent required
by, and in accordance with, GAAP.

          (d)
Neither the Company nor any of its ERISA Affiliates has (i) incurred or
reasonably expects to incur, either directly or indirectly, any material
Liability under Title I or Title IV of ERISA or related provisions of the Code
or foreign Law relating to employee benefit plans; (ii) failed to timely pay
premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn from any
Benefit Plan; or (iv) engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA.

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          (e)
With respect to each Benefit Plan (i) except as set forth in Schedule
3.19, no such plan is a Multi-employer Plan, and all contributions required
to be paid by the Company or its ERISA Affiliates have been timely paid to the
applicable Multi-employer Plan; (ii) no such plan is a “multiple employer plan”
within the meaning of Section 413(c) of the Code or a “multiple employer welfare
arrangement” (as defined in Section 3(40) of ERISA); (iii) no Proceeding has
been initiated by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee for any such plan; (iv) no such plan is subject to
the minimum funding standards of Section 302 of ERISA or Section 412 of the
Code, and no plan listed in Schedule 3.19 has failed to satisfy the
minimum funding standards of Section 302 of ERISA or Section 412 of the Code;
and (v) no “reportable event,” as defined in Section 4043 of ERISA, has occurred
with respect to any such plan.

          (f)
Except as set forth in Schedule 3.19 and as required by applicable Law,
no provision of any Benefit Plan could reasonably be expected to result in any
limitation on the Purchaser or any of its Affiliates from amending or
terminating any Benefit Plan. The Company has no commitment or obligation and
has not made any representations to any employee, officer, director, independent
contractor or consultant, whether or not legally binding, to adopt, amend or
modify any Benefit Plan or any collective bargaining agreement, in connection
with the consummation of the transactions contemplated by this Agreement or
otherwise.

          (g)
Other than as required under Section 601 et. seq. of ERISA or other applicable
Law, no Benefit Plan provides post-termination or retiree welfare benefits to
any individual for any reason, and neither the Company nor any of its ERISA
Affiliates has any Liability to provide post-termination or retiree welfare
benefits to any individual or ever represented, promised or contracted to any
individual that such individual would be provided with post-termination or
retiree welfare benefits.

          (h)
There is no pending or, to Seller's Knowledge, threatened Proceeding relating to
a Benefit Plan (other than routine claims for benefits), and no Benefit Plan has
within the three years prior to the date hereof been the subject of an
examination or audit by a Governmental Authority or the subject of an
application or filing under or is a participant in, an amnesty, voluntary
compliance, self-correction or similar program sponsored by any Governmental
Authority.

          (i)
There has been no amendment to, announcement by the Seller, the Company or any
of their Affiliates relating to, or change in employee participation or coverage
under, any Benefit Plan or collective bargaining agreement that would increase
the annual expense of maintaining such plan above the level of the expense
incurred for the most recently completed fiscal year with respect to any
director, officer, employee, independent contractor or consultant, as
applicable. None of the Seller, the Company, nor any of their Affiliates has any
commitment or obligation or has made any representations to any director,
officer, employee, independent contractor or consultant, whether or not legally
binding, to adopt, amend or modify any Benefit Plan or any collective bargaining
agreement.

          (j)
Each Benefit Plan that is subject to Section 409A of the Code has been operated
in compliance with such section and all applicable regulatory guidance
(including notices, rulings and proposed and final regulations).

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          (k)
Neither the execution of this Agreement nor any of the transactions contemplated
by this Agreement will (either alone or upon the occurrence of any additional or
subsequent events): (i) entitle any current or former director, officer,
employee, independent contractor or consultant of the Company to severance pay
or any other payment; (ii) accelerate the time of payment, funding or vesting,
or increase the amount of compensation due to any such individual; (iii) limit
or restrict the right of the Company to merge, amend or terminate any Benefit
Plan; (iv) increase the amount payable under or result in any other material
obligation pursuant to any Benefit Plan; or (v) result in “excess parachute
payments” within the meaning of Section 280G(b) of the Code.

     3.20 Forecasts. The
forecasts, projections, estimates, business plans and budgets that have been
provided to the Purchaser or its representatives by the Seller or its
representatives with respect to the Company, its Business or the Project are the
forecasts, projections, estimates, business plans and budgets that were prepared
by or for the Seller in the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Purchaser acknowledges that the Seller has not
made any representations or warranties to the Purchaser regarding any forecasts,
projections, estimates, business plans or budgets, or mineral reserves or
resources and there are not and shall not be deemed to be representations or
warranties of the Seller in respect of future revenues, expenses or
expenditures, future results of operations (or any component thereof), future
cash flows, future financial condition (or any component thereof) or future
reserves or resources.

     3.21 Unlawful Payments and
Contributions. None of the Seller, the Company, or any of their respective
directors, managers, officers or any other employees or agents have (i) used any
of the Company’s funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity, (ii)
made any direct or indirect unlawful payment to any government official or
employee from Company funds, (iii) violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977, in connection with the Company’s
business, or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any person or entity with respect to matters
pertaining to the Company or the Business.

     3.22 Books and Records.
The minute books and stock record books of the Company, all of which have been
made available to the Purchaser, are complete and correct and have been
maintained in accordance with sound business practices. The minute books of the
Company contain accurate and complete records of all meetings, and actions taken
by written consent of, the stockholders, the members, the manager, the board of
directors, the board of managers and any committees of the board of directors of
the Company (in each case, as applicable), and no meeting, or action taken by
written consent, of any such stockholders, members, managers, board of
directors, board of manager or committee has been held for which minutes have
not been prepared and are not contained in such minute books. At the Closing,
all of those books and records will be in the possession of the Company.

     3.23 Condition and Sufficiency
of Assets. The buildings, plants, structures, furniture, fixtures,
machinery, equipment, vehicles and other items of tangible personal property of
the Company are structurally sound, are in good operating condition and repair
(ordinary wear and tear excepted), and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery,
equipment, vehicles and other items of tangible personal property is in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The buildings, plants, structures,
furniture, fixtures, machinery, equipment, vehicles and other items of tangible
personal property currently owned or leased by the Company, together with all
other properties and assets of the Company, are sufficient for the continued
conduct of the Project and the Company's Business after the Closing in
substantially the same manner as conducted prior to the Closing and constitute
all of the rights, property and assets necessary to conduct the business of the
Company as currently conducted.

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     3.24 Full Disclosure. To
the Knowledge of the Seller, the representations and warranties made by the
Seller in this Agreement do not contain any untrue statement of material fact or
omit to state a material fact necessary to make any statement in light of the
circumstances in which they were made, not misleading.

     3.25 Brokers. No broker,
investment bank, financial advisor or other Person is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Seller.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER 

     The Purchaser represents and
warrants to the Seller that the statements contained in this Article 4 are true
and correct as of the Closing Date, as follows:

     4.1 Corporate Status and
Authority. The Purchaser is a limited partnership, validly existing and in
good standing under the laws of the British Virgin Islands. The Purchaser has
all requisite company power and authority to execute and deliver this Agreement
and the Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Purchaser of this
Agreement and the Transaction Documents to which it is a party have been duly
authorized by the Purchaser, which constitutes all necessary company action on
the part of the Purchaser for such authorization. This Agreement has been duly
executed and delivered by the Purchaser and, assuming valid execution and
delivery by the Seller, constitutes the valid and binding obligation of the
Purchaser enforceable against Purchaser in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application referring to or
affecting the enforcement of creditors’ rights, or by general equitable
principles. Upon the Closing, the Transaction Documents shall be duly executed
and delivered by the Purchaser and shall constitute the valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application referring to or affecting the enforcement of creditors’
rights, or by general equitable principles.

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     4.2 No Conflicts. Except
as set forth in Schedule 4.2:

          (a)
Organization Documents. The execution, delivery and performance by the
Purchaser of this Agreement and the Transaction Documents to which it is
respectively a party and the consummation of the transactions contemplated
hereby and thereby will not result in: (i) any conflict with the Organizational
Documents of the Purchaser, or (ii) any breach or violation of or default under,
or result in the creation or imposition of any Lien under, any statute,
regulation, judgment, order or decree, or any mortgage, deed of trust,
indenture, security agreement, pledge or any other similar instrument to which
the Purchaser is a party or by which the Purchaser or any of its respective
properties or assets are bound.

          (b)
Governmental Consents. Except as set forth in Schedule 3.4(b), no
consent, approval or authorization of or filing with any Governmental Authority
is required on the part of the Purchaser in connection with the execution and
delivery of this Agreement and the Transaction Documents to which they it is a
party or the consummation of the transactions contemplated hereby and thereby,
except such filings, consents or approvals which, if not made or obtained prior
to Closing, are not reasonably expected to have a Material Adverse Effect on the
ability of the Purchaser to perform its obligations hereunder or thereunder or
to consummate the transactions contemplated hereby or thereby.

     4.3 Litigation. There is
no claim, legal action, suit, arbitration, governmental investigation or other
proceeding, nor any order, decree or judgment, in progress, pending or in
effect, nor, to the Knowledge of the Purchaser, threatened, which is related to
the transactions contemplated by this Agreement or any such action taken or to
be taken by the Purchaser pursuant to or in connection with this Agreement.

     4.4 Speculative
Investment. The Purchaser recognizes that: (i) the purchase of the Purchased
Membership Interest involves a high degree of risk, is speculative and only
investors who can afford the loss of their entire investment should consider
investing in the Company and/or the Class A Units; (ii) the Purchaser may not be
able to liquidate its investment; (iii) transferability of the Class A Units is
limited; and, (iv) in the event of a disposition of the Purchased Membership
Interest, the Purchaser could sustain the loss of its entire investment.

     4.5 Accredited Investor.
The Purchaser represents that the Purchaser is an “accredited investor” for
purposes of applicable securities Laws.

     4.6 Securities Not
Registered. The Purchaser is acquiring the Purchased Membership Interest
solely for its own account for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution thereof. The Purchaser
acknowledges that the Class A Units are not registered under the Securities Act
of 1933, as amended, or any state securities laws, and that the Class A Units
may not be transferred or sold except pursuant to the registration provisions of
the Securities Act of 1933, as amended or pursuant to an applicable exemption
therefrom and subject to state securities laws and regulations, as
applicable.

     4.7 Legended Certificates.
The Purchaser consents to the placement of a legend on any certificate or other
document evidencing the Class A Units substantially as set forth in the LLC
Agreement, that such Class A Units have not been registered under the Securities
Act of 1933, as amended, or any state securities or “blue sky” laws
and setting forth or referring to the restrictions on transferability and sale
thereof contained in this Agreement. The Purchaser is aware that the Company
will make a notation in its appropriate records with respect to the restrictions
on the transferability of the Class A Units. 

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     4.8 Brokers. No broker,
investment bank, financial advisor or other Person is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser and any of its Affiliates, except for any
of the foregoing that will be paid solely by the Purchaser.

ARTICLE 5
COVENANTS

     The Purchaser, the Seller and the
Company each covenant and agree as follows:

     5.1 Further Assurances;
Transfer of Certain Assets.

          (a)
From time to time from and after the Closing Date, each of the Parties hereto
will, at their own cost and expense, execute and deliver such further
instruments, assignments, certificates and documents and will take such other
actions as the Purchaser or the Seller, as the case may be, may reasonably
request in order to effectuate the purposes of this Agreement and to carry out
the terms hereof. Without limiting the generality of the foregoing, at any time
and from time to time after the Closing Date: (i) at the request of the
Purchaser, the Seller will execute and deliver or cause to be executed and
delivered such other instruments, assignments, certificates and documents and
take or cause to be taken such actions as the Purchaser may reasonably deem
necessary in order to consummate the transactions contemplated by this Agreement
and to effectuate the purposes and intent of this Agreement and (ii) at the
request of the Seller, the Purchaser will execute and deliver such other
instruments, assignments, certificates and documents and agreements, and take
such action, as the Seller may reasonably deem necessary in order to consummate
the transactions contemplated hereby and to effectuate the purposes and intent
of this Agreement.

          (b)
Following the Closing, to the extent not transferred and assigned at or prior to
the Closing, the Seller shall immediately transfer and assign, or cause to be
transferred and assigned, to the Company all Permits, Bonds, Real Property
Leases, Contracts, employees and other assets and property that are currently
owned by or in the name of the Seller, but that are used by or for the benefit
of the Company or are used for the operation of the Project or the Business, in
each case without any further or additional consideration therefor. To the
extent that any other asset or property primarily used for the Project or the
Business is titled or owned in the name of the Seller, the Seller shall
immediately transfer and assign, or cause to be transferred and assigned, to the
Company such asset or property, in each case without any further or additional
consideration therefor. The Seller shall take all actions necessary to
effectuate such transfers and assignments, and the Seller shall not willfully
take any action that will have the effect of delaying, impairing or impeding any
such transfer or assignment or the receipt of any consent, authorization, order
or approval therefor.

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          (c)
Effective on the Closing Date, the Seller, the Purchaser and the Company shall
enter into the Transition Services Agreement for the provision of
administrative, operational, employee and other transitional services by the
Seller to the Company during an initial transition period of six (6) months
commencing on the Closing Date, as such period may be extended pursuant to the
terms of the Transition Services Agreement, in each case without any further or
additional consideration other than the Purchase Price and the consideration set
forth herein.

          (d)
Notwithstanding the delivery of the Preliminary Disclosure Schedules at the
Closing, the Seller, the Purchaser and the Company agree to create and finalize
the Disclosure Schedules by the date that is thirty (30) days following the
Closing Date. Each Party shall notify the others in writing of its acceptance of
the final Disclosure Schedules, and no Party shall willfully take any action
that would have the effect of delaying, impairing or impeding the creation and
acceptance of the Disclosure Schedules.

     5.2 Disclosure
Schedules.

          (a)
Delivery. Simultaneously with the execution hereof, the Seller is
delivering to the Purchaser disclosure Schedules as contemplated by this
Agreement (the “Preliminary Disclosure Schedules”), and the Parties hereto agree
that they shall cooperate with each other and work to create final, full,
complete and accurate disclosure Schedules with respect to the information set
forth in the Preliminary Disclosure Schedules together with a full, complete and
accurate specification of the assets and Liabilities of the Company, including
all Real Property, Contracts, Permits, Bonds, employees, insurance policies,
Benefit Plans and other assets and Liabilities of the Company, which shall be
completed by the date that is no later than thirty (30) days following the
Closing Date, with such final disclosure Schedules to be reasonably acceptable
to the Seller, the Purchaser and the Company (with such final disclosure
Schedules being the “Disclosure Schedules”). References to Schedules in Article
3 of this Agreement shall be deemed to be references to the Preliminary
Disclosure Schedules for the purpose of the Closing, and following the
preparation and acceptance of the Disclosure Schedules as described herein,
references to Schedules in Article 3 of this Agreement shall be deemed to be
references to the Disclosure Schedules.

          (b)
Interpretation. The exhibits and attachments to the Preliminary
Disclosure Schedules and the Disclosure Schedules form an integral part of such
Preliminary Disclosure Schedules and such Disclosure Schedules and are
incorporated by reference for all purposes as if set forth fully therein. The
Parties hereto intend that each representation, warranty and covenant contained
herein shall have independent significance. If any Party hereto has breached any
representation, warranty or covenant contained herein, the fact that there
exists another representation, warranty or covenant relating to the same subject
matter which the breaching Party has not breached shall not detract from or
mitigate the fact that the breaching Party is in breach of the first
representation, warranty or covenant.

     5.3 Taxes.

          (a)
Apportionment of Taxes. For purposes of this Agreement, the portion of
Tax with respect to the income, property or operations of the Company that is
attributable to any Straddle Period will be apportioned between the portion of the
Straddle Period that extends before the Closing Date up through the Closing Date
(the “Pre-Closing Straddle Period”) and the portion of the Straddle
Period that extends from day after the Closing Date to the end of the Straddle
Period (the “Post-Closing Straddle Period”) in accordance with this
Section 5.3(a). The portion of such Tax attributable to the Pre-Closing
Straddle Period will (a) in the case of any Taxes not based on income, receipts,
proceeds, profits, payroll or expenditures or similar items, be deemed to be the
amount of such Tax for the entire taxable period multiplied by a fraction, the
numerator of which is the number of days in the Pre-Closing Straddle Period and
denominator of which is the number of days in the Straddle Period, and (b) in
the case of any other Taxes, be deemed equal to the amount that would be payable
if the Straddle Period ended on and included the Closing Date. The portion of
Tax attributable to a Post-Closing Straddle Period will be calculated in a
corresponding manner. Seller will be liable for the payment of all Taxes of each
of the Company that are attributable to any Pre-Closing Tax Period or any
Pre-Closing Straddle Period.

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          (b)
Seller Tax Returns. Seller will prepare or cause to be prepared, for the
Company, all income Tax Returns required to be filed by the Company for all
Pre-Closing Tax Periods (“Seller Income Tax Returns”). With respect to
transactions that are in all material respects similar to transactions that
occurred in prior periods, such Seller Income Tax Returns shall be prepared in a
manner consistent with past practice of the Company in preparing its Tax Returns
unless contrary to applicable Law. All such Seller Income Tax Returns shall be
delivered to Purchaser by Seller no later than thirty (30) days prior to the due
date thereof (taking into account the extension of time for filing). Purchaser
shall be permitted to review and comment on all Seller Income Tax Returns to the
extent they related to (i) the income or operations of the Company or (ii) items
of income gain, loss or deduction recognized in connection with the transactions
contemplated herein. The cost of preparing such Seller Income Tax Returns shall
be borne by the Seller. At the request of Seller, Purchaser shall cause the
Company to execute and timely file (taking into account the extension of time
for filing) the Seller Income Tax Returns in the form prepared by the Seller in
accordance with this Agreement.

          (c)
Tax Contests. Purchaser and the Seller shall, to the extent requested in
writing by the other Party and at the cost and expense of such requesting Party,
use all reasonable efforts to cooperate with each other and their respective
representatives, in a prompt and timely manner, in conjunction with any inquiry,
audit, examination, investigation, dispute or litigation involving any Tax
Return relating to the Company or the Business which may affect the liability of
each of the Purchaser and the Seller for Taxes under this Agreement. Such
cooperation shall include, but not be limited to, making available to the Seller
or Purchaser, as the case may be, during normal business hours, and within ten
(10) Business Days of any reasonable request therefor, all books, records and
information, and the assistance of all officers and employees, reasonably
required in connection with any Tax inquiry, audit, examination, investigation,
dispute, litigation or any other matter.

          (d)
Allocation of Purchase Price. Seller and Purchaser acknowledge that the
purchase of interests in the Company contemplated by this Agreement will be
treated for U.S. federal income tax purposes as a purchase of a 60% undivided
interest in the assets of the Company followed by a contribution by Purchaser of
such undivided interest to a partnership under Section 721 of the Code.
Purchaser and the Seller acknowledge that, under Section 1060 of the Code, Purchaser and the Seller must report information regarding the
allocation of the Purchase Price to the United States Secretary of Treasury by
attaching Department of Treasury, Internal Revenue Service, Form 8594 to their
federal income tax returns for the tax period which includes the Closing Date.
Purchaser and the Seller agree to report for federal income Tax purposes in
accordance with (i) the tax treatment described in this Section 5.3(d), and (ii)
the valuation of the Purchase Price and the allocation of the Purchase Price to
be jointly prepared by the Seller and the Purchaser within thirty (30) days
following the Closing Date (the “Valuation and Allocation Schedule”). The Seller
and the Purchaser agree to cooperate with one another and to jointly prepare a
mutually agreeable Valuation and Allocation Schedule within such thirty (30) day
period following the Closing Date. The valuation and allocations set forth in
the Valuation and Allocation Schedule shall be conclusive and binding on
Purchaser and the Seller for all purposes. Purchaser and the Seller agree that
they shall prepare and file United States Treasury Form 8594, consistent with
the Valuation and Allocation Schedule, with their applicable tax returns for the
taxable year of the transactions contemplated hereby.

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          (e)
Transfer Taxes. Seller shall be responsible for the payment of, and shall
timely pay, all transfer, sales, documentary, use, stamp, registration and other
similar real property recording Taxes (including any penalties and interest
thereon) incurred in connection with this Agreement, the conveyance of the Real
Property and the transactions consummated in this Agreement (the “Transfer
Taxes”). Seller shall properly prepare and execute all certificates and
declarations of value and Transfer Tax Returns in connection with the
transactions contemplated in this Agreement and be solely responsible therefor
except that Purchaser will execute any such document required to be executed by
Purchaser. The Parties shall cooperate in obtaining any exemption for, or
reduction in, Transfer Taxes available under applicable Laws.

     5.4 Fees and Expenses.
Except as otherwise specifically provided in this Agreement, the Seller, on the
one hand, and Purchaser, on the other hand, shall each bear and pay its own
fees, costs and expenses incurred (including fees, disbursements and other costs
of any brokers, finders, investment bankers, financiers, attorneys, accountants,
consultants and other advisors) in connection with this Agreement and in
connection with all obligations required to be performed by each of them under
this Agreement.

ARTICLE 6
CONDITIONS PRECEDENT OF PURCHASER

     6.1 Conditions Precedent.
The obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment of all of the following
conditions precedent (unless waived in the sole discretion of the
Purchaser):

          (a)
Representations, Warranties and Obligations of the Seller. The
representations and warranties contained in Article 3 shall be true and correct
as of the Closing Date. The Seller shall have duly performed and complied in all
material respects with all agreements and covenants contained herein required to
be performed or complied with by them at or before the Closing.

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          (b)
Deliveries. The Seller shall have delivered to the Purchaser:

          (i) An
officer’s certificate, dated as of the Closing Date and signed by the President
or chief executive officer of the Seller, as to the fulfillment of the
conditions set forth in Section 6.1(a);

          (ii) A
certificate of the Secretary (or equivalent officer) of the Seller certifying
that attached thereto are (i) true and complete copies of the certificate of
incorporation and bylaws of the Seller, (ii) true and complete copies of the
resolutions adopted by the board of directors of the Seller authorizing the
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, and that all such resolutions are in full force and effect, and (iii)
the names and true signatures of the officers and directors of each of the
Seller signing this Agreement or any Transaction Document;

          (iii)
A certificate of valid existence and good standing of the Seller in each
jurisdiction in which the operation of its business or the ownership of its
assets requires it to be qualified, issued not earlier than five (5) days prior
to the Closing Date;

          (iv) A
certificate of valid existence and good standing of the Company in each
jurisdiction in which the operation of its business or the ownership of its
assets requires it to be qualified, issued not earlier than five (5) days prior
to the Closing Date; and

          (v) A
certificate dated the Closing Date signed by an appropriate executive officer of
the Seller pursuant to Treasury Regulations Section 1.1445 -2(b) certifying that
the Seller is not a foreign person within the meaning of Section 1445 of the
Code (the “FIRPTA Certificate”).

          (c)
Membership Interests.

          (i)
The Seller shall have delivered certificates representing 6,000,000 Class A
Units of the Company, which shall be equal to sixty percent (60%) of the then
issued and outstanding ownership interests in the Company, free and clear of any
Lien or restriction, except as set forth in the LLC Agreement, duly endorsed in
blank or accompanied by unit powers or other instruments of transfer duly
executed in blank; and

          (ii)
The Seller shall have executed and delivered the Membership Interest Assignment
with respect to the Purchased Membership Interest to the Purchaser.

          (d)
Transaction Documents. The Seller shall have executed and delivered all
other Transaction Documents and any other instruments reasonably required by the
Purchaser to be executed at or before Closing in connection with the
transactions contemplated hereby.

          (e)
Limited Liability Company Operating Agreement; Transition Services
Agreement.

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          (i)
The Seller shall have executed and delivered the Amended and Restated Limited
Liability Company Agreement, in substantially the form attached hereto as
Exhibit B; and

          (ii)
The Seller shall have executed and delivered the Transition Services Agreement,
in substantially the form attached hereto as Exhibit C. 

          (f)
Consents and Approvals.

          (i)
All consents, authorizations, orders, approvals or waivers from Governmental
Authorities necessary to consummate the transactions contemplated hereby shall
have been received, and executed counterparts thereof shall have been delivered
to the Purchaser at or prior to the Closing; and

          (ii)
All consents, authorizations, orders, approvals or waivers from all Persons
necessary to consummate the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to the
Purchaser at or prior to the Closing.

          (g)
Material Adverse Change. There shall have been no change which has had,
or could reasonably be expected to have, a Material Adverse Effect on the
Company, the Project or the Business.

          (h)
No Injunction. There shall not be in effect any injunction or other order
or any statute, ruling or Law issued by a court of competent jurisdiction or
Governmental Authority restraining, enjoining or prohibiting, and no such action
or proceeding by any Governmental Authority or third Person shall be pending
before any court of competent jurisdiction or threatened in writing to restrain,
enjoin or prohibit the consummation of, or challenge the validity or legality
of, the transactions contemplated by this Agreement.

          (i)
No Pending Action. No action, suit or other proceeding by any Person to
restrain or prohibit the transactions contemplated by this Agreement and the
Transaction Documents shall be pending.

          (j)
Conduct of Operations. After the Closing, the Company shall be able to
continue to operate and manage the Project and conduct the Business in
substantially the same manner as it is conducted immediately prior to
Closing.

          (k)
Conversion of Intercompany Debt. Prior to the Closing, all intercompany
indebtedness owed by the Company to the Seller shall have been forgiven or
converted into equity in the Company.

          (l)
Other. All actions taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby are reasonably satisfactory in form and substance to the
Purchaser.

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     6.2 Waiver. The Purchaser
may waive in writing the fulfillment or satisfaction of any or all of the
conditions set forth in Section 6.1 of this Agreement.

ARTICLE 7
CONDITIONS PRECEDENT OF THE SELLER

     7.1 Conditions Precedent.
The obligations of the Seller to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment of all of the following
conditions precedent (unless waived in the sole discretion of the Seller):

          (a)
Representations, Warranties and Obligations of Purchaser. The
representations and warranties contained in Article 4 shall be true and correct
as of the Closing Date. The Purchaser shall have duly performed and complied in
all Material respects with all agreements contained herein required to be
performed or complied with by it at or prior to the Closing.

          (b)
Deliveries. The Purchaser shall have delivered to the Seller: 

          (i) a
certificate, dated the Closing Date and signed by an officer, as to the
fulfillment of the conditions set forth in Section 7.1(a); and

          (ii) a
certificate of the Secretary of the Purchaser certifying that attached thereto
are (i) true and complete copies of the certificate of incorporation and bylaws
of Purchaser, (ii) true and complete copies of the resolutions adopted by the
boards of directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents and the consummation
of the transactions contemplated hereby and thereby, and that all such
resolutions are in full force and effect, and (iii) the names and true
signatures of the officers and directors of Purchaser signing this Agreement or
the Transaction Documents.

          (c)
Transaction Documents. The Purchaser shall have executed and delivered
all Transaction Documents or other instruments to which each is a party required
to be executed at or before Closing in connection with the transactions
contemplated hereby.

          (d)
No Injunction. There shall not be in effect any injunction or other order
or any statute, ruling or Law issued by a court of competent jurisdiction or
Governmental Authority restraining, enjoining or prohibiting, and no such action
or Proceeding by any Governmental Authority or third Person shall be pending
before any court of competent jurisdiction or threatened in writing to restrain,
enjoin or prohibit the consummation of, or challenge the validity or legality
of, the transactions contemplated by this Agreement.

          (e)
No Pending Action. No action, suit or other proceeding by any Person to
restrain or prohibit the transactions contemplated by this agreement and the
Transaction Documents shall be pending.

     7.2 Waiver. The Seller may
waive in writing the fulfillment or satisfaction of any or all of the conditions
set forth in Section 7.1 of this Agreement.

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ARTICLE 8
INDEMNIFICATION

     8.1 Indemnity by the
Seller. Subject to the limitations contained in Sections 8.7, 8.8 and 8.9,
from and after the Closing, the Seller shall indemnify, defend and hold harmless
the Purchaser and each of its Affiliates, and their respective directors,
officers, partners, managers, members, shareholders, unitholders, employees,
agents and representatives (each of whom may be an Indemnitee pursuant to this
Section 8.1) (collectively, the “Purchaser Indemnitees”) from and against, and
pay and reimburse each such Purchaser Indemnitee for, whether or not any of the
following Losses arise out of any Third-Party Claim, the following:

          (a)
Third-Party Claims. Any and all Third-Party Claims which may be asserted
or claimed against any such Purchaser Indemnitee or which any such Purchaser
Indemnitee shall incur or suffer to the extent that such Third-Party Claims
arise out of, result from or relate to: (i) any untrue or inaccurate
representation or breach of warranty of the Seller in this Agreement or (ii) a
default or breach of any covenant or agreement made by the Seller under this
Agreement.

          (b)
Breach of Representation, Warranty, Covenant, Etc. Any and all Losses
which may be asserted or claimed against such Purchaser Indemnitee or which such
Purchaser Indemnitee may incur, suffer or be liable or responsible for and which
arise out of, result from or relate to: (i) any untrue or inaccurate
representation or breach of warranty of the Seller; or (ii) any default or
breach of any covenant or agreement on the part of the Seller.

          (c)
Taxes Allocable to Seller. Any of the following Taxes (and all related
interest and penalties) (whether imposed or otherwise payable directly, as a
successor or transferee, pursuant to a contract or other agreement entered (or
assumed) the Company on or prior to the Closing Date, and whether imposed or
otherwise payable with respect to the filing of any Tax Return, an adjustment by
a Governmental Authority, or otherwise): (i) any Taxes imposed on or payable
with respect to the Company with respect to any Pre-Closing Tax Period; (ii) any
Taxes of or imposed on the Company as a result of Section 1.1502 -6 of the
income tax regulations promulgated under the Code (or any similar provision of
state, local, or foreign Law) as a result of the Company having been a member of
any consolidated, combined, unitary or affiliated group prior to the Closing;
(iii) any Taxes of any Person imposed on the Company arising under the
principles of transferee or successor liability or by contract, relating to an
event or transaction occurring before the Closing Date; (iv) any Taxes incurred
as a result of the Company’s change from cash accounting to accrual accounting;
and (v) all Taxes unpaid as a result of any loss, reduction, or disallowance of
any refund (whether as cash or a credit offset against Taxes otherwise payable),
that was received or utilized by the Company on or prior to the Closing Date;
and (vi) personal property tax owing with respect to equipment or inventory held
by the Company.

     8.2 Indemnity by the
Purchaser. From and after the Closing, the Purchaser shall indemnify, defend
and hold harmless the Seller and its Affiliates and their respective directors,
officers, partners, managers, members, shareholders, unitholders, employees,
agents and representatives (each of whom may be an Indemnitee pursuant to this
Section 8.2) (collectively, the “Seller Indemnitees”) from and against, and pay
and reimburse each such Seller Indemnitee for, whether or not any of the following Losses arise out of
any Third-Party Claim, the following:

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          (a)
Third-Party Claims. Any and all Third-Party Claims which may be asserted
or claimed against any such Seller Indemnitee, or which any such Seller
Indemnitee shall incur or suffer to the extent that such Third-Party Claims
arise out of, result from or relate to: (i) any untrue or inaccurate
representation or breach of warranty of the Purchaser in this Agreement or (ii)
a default or breach of any covenant or agreement made by the Purchaser in this
Agreement.

          (b)
Breach of Representation, Warranty, Covenant, Etc. Any and all Losses
which may be asserted or claimed against any such Seller Indemnitee or which any
such Seller Indemnitee shall incur, suffer or be liable or responsible for and
which arise out of, result from or relate to: (i) any untrue or inaccurate
representation or breach of warranty of the Purchaser in this Agreement; or (ii)
any default or breach of any covenant or agreement on the part of the Purchaser
under this Agreement.

     8.3 Notification of
Claims. In no case shall any Indemnitor under this Agreement be liable for
indemnification under this Agreement with respect to any Third-Party Claim
against any Indemnitee unless the Indemnitee shall have delivered to the
Indemnitor a Claim Notice and the following conditions are satisfied:

          (a)
Timely Delivery of Claim Notice. Except as provided in Sections 8.3(b) or
8.3(c), no right to indemnification under this Article 8 shall be available to
an Indemnitee with respect to a Third-Party Claim unless the Indemnitee shall
have delivered to the Indemnitor within the Notice Period, and within the
applicable time period provided in Section 8.7(a), a notice describing in
reasonable detail the facts giving rise to such Third-Party Claim (a “Claim
Notice”) and stating that the Indemnitee intends to seek indemnification for
such Third-Party Claim from the Indemnitor pursuant to this Article 8.

          (b)
Late Delivery of Claim Notice. If, in the case of a Third-Party Claim, a
Claim Notice is not given by the Indemnitee within the Notice Period, the
Indemnitee shall nevertheless be entitled to be indemnified under this Article 8
except to the extent that the Indemnitor can establish that it has been
prejudiced by such time elapsed, so long as such Claim Notice is delivered
within the applicable time period provided in Section 8.7(a).

          (c)
Paid or Settled Claims. If a Claim Notice is not given by the Indemnitee
prior to the payment or settlement of a Third-Party Claim, the Indemnitee shall
be entitled to be indemnified under this Article 8 only to the extent that the
Indemnitee can establish that the Indemnitor has not been prejudiced by such
payment or settlement.

     8.4 Defense of Claims.
Upon receipt of a Claim Notice from an Indemnitee with respect to any
Third-Party Claim, the Indemnitor shall have the right to assume and control the
defense thereof (and any related settlement negotiations) with counsel
reasonably satisfactory to such Indemnitee, and the Indemnitee shall cooperate
in all reasonable respects in such defense. The Indemnitee shall have the right
to employ separate counsel at such Indemnitee’s expense in any action or claim
and to participate in the defense thereof; provided, however, that the reasonable fees and expenses of counsel employed by the
Indemnitee shall be at the expense of the Indemnitor if such counsel is retained
pursuant to the following sentence or if the employment of such counsel has been
specifically authorized (in the reasonable discretion of the Indemnitor) in
writing by the Indemnitor. If the Indemnitor does not notify the Indemnitee
within thirty (30) days after receipt of the Claim Notice of its intention to
assume the defense of such Third-Party Claim, the Indemnitee shall have the
right to defend the claim with counsel of its choosing reasonably satisfactory
to the Indemnitor. Notwithstanding anything to the contrary contained in this
Section 8.4, (i) the Indemnitee shall have the right to employ separate counsel,
at its own expense, if there shall be available to the Indemnitee one or more
defenses or one or more counterclaims which conflicts with one or more defenses
or one or more counterclaims available to the Indemnitor and (ii) the Indemnitor
shall not be entitled to control (but shall be entitled participate at its own
expense in the defense of), and the Indemnitee (at its sole expense) shall be
entitled to have sole control over, the defense or settlement of any Third-Party
Claim to the extent such Third-Party Claim seeks an order, injunction,
non-monetary or other equitable relief against the Indemnitee which, if
successful, would reasonably be expected to have a Material Adverse Effect on
the Indemnitee; provided that if an Indemnitee assumes sole control of the
defense or settlement of such order, injunction, non-monetary or other equitable
relief with respect to any Third-Party Claim pursuant to the foregoing clause
(ii), the Indemnitee shall not be entitled to indemnification from the
Indemnitor with respect to Losses associated therewith. The Indemnitee shall
send a written notice to the Indemnitor of any proposed settlement of any claim,
which settlement the Indemnitor may reject, in its reasonable judgment, within
thirty (30) days of receipt of such notice. Failure to reject such notice within
such 30-day period shall be deemed an acceptance of such settlement.

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     8.5 Access and
Cooperation. After the Closing Date, the Purchaser and the Seller shall (i)
each fully cooperate with the reasonable requests of the other as to all
Third-Party Claims, shall make available to the other, as reasonably requested,
all information, records and documents relating to all Third-Party Claims and
shall preserve all such information, records and documents until the termination
of any Third-Party Claim and (ii) make available to the other, as reasonably
requested, personnel (including technical and scientific), agents and other
representatives who are responsible for preparing or maintaining information,
records or other documents, or who may have particular knowledge with respect to
any Third-Party Claim.

     8.6 Assessment of Claims.
In the event that any of the Losses for which an Indemnitor is or is allegedly
responsible pursuant to Sections 8.1 or 8.2 are recoverable or potentially
recoverable against any third party at the time when payment is due hereunder,
following payment by the Indemnitor to the Indemnitee for such Losses the
Indemnitee shall assign any and all rights that it may have to recover such
Losses to the Indemnitor, or, if such rights are not assignable under applicable
law or otherwise, the Indemnitee shall attempt in good faith to collect any and
all Losses on account thereof from such third party for the benefit of, and at
the expense and direction of, the Indemnitor.

     8.7 Survival of
Representations and Warranties; Knowledge of Breach; No Additional
Representations.

          (a)
All representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder and continue in full force and effect
thereafter, regardless of any investigation, due diligence, review or
analysis made or to be made by or on behalf of any Party hereto or any prior
knowledge with respect thereto, for a period of twenty-four (24) months
following the Closing Date, except for the representations and warranties
of the Seller provided for in Section 3.1 (Corporate Status and Authority),
Section 3.2 (Organization of Company), Section 3.3 (Membership Interests),
Section 3.4 (No Conflicts), Section 3.6 (Absence of Undisclosed Liabilities),
Section 3.10 (Permits; Bonds; Compliance with Law), Section 3.12 (Taxes), and
Section 3.14 (Environmental Compliance), each of which shall survive the Closing
hereunder and continue in full force and effect thereafter, regardless of any
investigation, due diligence, review or analysis made or to be made by or on
behalf of any Party hereto, until 90 days after the expiration of the statute of
limitations applicable thereto (collectively, the foregoing representations and
warranties contained in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.10, 3.12, and 3.14
are referred to herein as the “Specified Representations”). Except as set forth
in this Section 8.7, an Indemnitor’s obligation to an Indemnitee under this
Article 8 with respect to any representation or warranty shall expire at the end
of the time period set forth in this paragraph, except with respect to any
matter set forth in a written notice delivered by an Indemnitee prior to such
expiration. Any representation or warranty serving as the basis of a claim in a
written notice shall survive the time periods set forth in this paragraph until
such claim is finally resolved. Except as otherwise provided in this Section
8.7(a), the covenants and agreements of the Parties set forth in this Agreement
shall survive the Closing until such covenants and agreements have been fully
performed in all respects.

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          (b)
Any due diligence, investigation, analysis, access to records, data, personnel,
facilities and information, sophistication, experience, document review and any
other actual or deemed sources of knowledge, data, analysis or information
outside the express provisions of this Agreement, the representations and
warranties given herein and the Schedules attached hereto, shall in no way limit
or be deemed to limit, qualify or otherwise waive or affect the scope, purpose,
intent, effect or validity or reliance on any representation, warranty or
condition or increase or heighten any materiality standard or threshold
contained herein.

     8.8 Consequential and Punitive
Damages. The Purchaser, on one hand, and the Seller, on the other hand,
agree that none of the Purchaser or the Seller shall be liable to the other with
respect to, and each Party hereby waives, incidental, consequential or punitive
damages under this Agreement or the Transaction Documents or in the performance
of the transactions contemplated hereby or thereby, unless such incidental,
consequential or punitive damages are components of or claimed as part of a
Third-Party Claim or Losses associated with or related to a Third-Party Claim,
in which case such incidental, consequential or punitive damages or claims
therefor shall be covered by the indemnification provisions of this Agreement
and shall be included in and as a part of Losses.

     8.9 Certain Limitations.
The indemnification provided for in Section 8.1 with respect to Section
8.1(a)(i) and Section 8.1(b)(i) and in Section 8.2 with respect to Section
8.2(a)(i) Section 8.2(b)(i) shall be subject to the following limitations:

          (a)
The Seller shall not be liable to any Purchaser Indemnitee for indemnification
under Section 8.1(a)(i) or Section 8.1(b)(i) until the aggregate of all Losses
in respect of indemnification under Section 8.1(a)(i) and Section 8.1(b)(i)
exceeds $10,000 on a cumulative basis (the “Deductible”), in which event the
Seller shall only be required to pay or be liable for Losses in excess of the Deductible; provided,
that the Deductible shall not apply to (i) Losses arising as a result of an
inaccuracy or breach of a Specified Representation, or (ii) Losses incurred by a
Purchaser Indemnitee as a result of fraud.

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          (b)
The Seller shall not be liable to any Purchaser Indemnitee for Losses in excess
of an aggregate of the Purchase Price (the “Cap”) with respect to
indemnification under Section 8.1(a)(i) and Section 8.1(b)(i); provided,
that the Cap shall not apply to: (i) Losses arising as a result of an
inaccuracy or breach of a Specified Representation, or (ii) Losses incurred by a
Purchaser Indemnitee for Losses incurred as a result of fraud.

          (c)
The Purchaser shall not be liable to any Seller Indemnitee for indemnification
under Section 8.2(a)(i) or Section 8.2(b)(i) until the aggregate of all Losses
in respect of indemnification under Section 8.2(a)(i) and Section 8.2(b)(i)
exceeds $10,000 on a cumulative basis (the “Purchaser Deductible”), in which
event the Purchaser shall only be required to pay or be liable for Losses in
excess of the Purchaser Deductible; provided, that the Purchaser
Deductible shall not apply to Losses incurred by a Seller Indemnitee as a result
of fraud.

          (d)
The Purchaser shall not be liable to any Seller Indemnitee for Losses in excess
of an aggregate of the Purchase Price (the “Purchaser Cap”) with respect to
indemnification under Section 8.2(a)(i) and Section 8.2(b)(i); provided,
that the Purchaser Cap shall not apply to Losses incurred by a Seller
Indemnitee for Losses incurred as a result of fraud.

          (e)
Once a Loss is agreed to by the Indemnitor or finally adjudicated to be payable
pursuant to this Article 8, the Indemnitor shall satisfy its obligations within
15 Business Days of such agreement or such final adjudication by wire transfer
of immediately available funds. The Parties hereto agree that should an
Indemnitor not make full payment of any such obligations within such 15 Business
Day period, any amount payable shall accrue interest from and including the date
of agreement of the Indemnitor or final adjudication to and including the date
such payment has been made at a rate per annum equal to ten percent (10%). Such
interest shall be calculated daily on the basis of a 365 day year and the actual
number of days elapsed.

          (f)
Notwithstanding Section 8.9(e), in the event that the Indemnitee consents in its
sole discretion, once a Loss is agreed to by the Indemnitor or finally
adjudicated to be payable pursuant to this Article 8, an Indemnitor may satisfy
its obligations (in whole or in part, at the sole discretion of the Indemnitee
and depending on the amount then due and the value of Class A Units to be
assigned) within 15 Business Days of such agreement or such final adjudication
by the transfer and assignment of Class A Units to the Indemnitee (with the
value of such Class A Units to be determined in accordance with the valuation
provisions of the LLC Agreement). If an Indemnitor desires to satisfy its
obligations by the transfer and assignment of Class A Units to an Indemnitee,
the Indemnitor will provide a written notice thereof to the Indemnitee, and the
Indemnitee will have 15 Business Days to accept or reject, in its sole
discretion, such proposed satisfaction of a Loss. The Parties hereto agree that
should an Indemnitor fail to complete the transfer and assignment of such Class
A Units to the Indemnitee within 15 Business Days following the Indemnitee’s
acceptance, any amount payable shall accrue interest from and including the date
of agreement of the Indemnitor or final adjudication to and including the date
such payment has been made at a rate per annum equal to ten percent (10%). Such interest shall be calculated daily on the basis of
a 365 day year and the actual number of days elapsed. If an Indemnitee rejects
the satisfaction of a Loss by the transfer of Class A Units, then the Indemnitor
shall pay the Indemnitee in immediately available funds in accordance with
Section 8.9(e).

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     8.10 Insurance. Payments
by an Indemnitor in respect of any Loss shall be limited to the amount of any
Loss that remains after deducting therefrom any insurance proceeds and any
indemnity, contribution or other similar payment received by the Indemnitee in
respect of any such claim. The Indemnitee shall use its commercially reasonable
efforts to recover under insurance policies or indemnity, contribution or other
similar agreements for any Loses prior to or concurrent with seeking
indemnification under this Agreement.

     8.11 Mitigation. Each
Indemnitee shall take all reasonable steps to mitigate any Loss upon becoming
aware of any event or circumstance that would be reasonably expected to, or
does, give rise thereto, including incurring reasonable costs only to the
minimum extent necessary to remedy the breach that gives rise to such Loss, to
the extent required by Law.

     8.12 Offset. Once a Loss
is agreed to by an Indemnitor or finally adjudicated to be payable pursuant to
this Article 8, the Parties hereto agree that any such amount owed by a Party
may be offset and deducted from any dividend, distribution, or other amount owed
or payable by an Indemnitee to any Indemnitor before payment and the amount of
such sum deducted will nonetheless be treated as paid to such Indemnitor.

     8.13 Limitation on
Indemnification. Effective upon Gryphon’s deemed resignation from the
Company as a Member thereof in exchange for a 3.5% Net Profit Interest, all in
accordance with Section 3.11 of the LLC Agreement, the indemnification
obligations of Gryphon under Section 8.1 of this Agreement shall terminate
effective as of the Resignation Effective Date (as defined in the LLC
Agreement).

     8.14 Third-Party
Beneficiaries. All Persons included with the terms “Purchaser Indemnitees”
and “Seller Indemnitees” are intended third-party beneficiaries of this Article
8 and shall have the right to enforce the benefits intended to be conferred upon
each them under this Article 8 as though they were parties to this
Agreement.

ARTICLE 9
MISCELLANEOUS

     9.1 Amendment. This
Agreement shall not be amended or modified except by an agreement in writing
duly executed by each of the Purchaser and the Seller.

     9.2 Entire Agreement. This
Agreement, including the Exhibits and Schedules hereto, contains all of the
terms and conditions agreed upon by the Parties relating to the subject matter
of this Agreement and supersedes all prior and contemporaneous agreements,
discussions, negotiations, correspondence, undertakings and communications of
the Parties, oral or written, respecting such subject matter.

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     9.3 Notices. All notices,
requests, demands and other communications made in connection with this
Agreement shall be in writing and shall be deemed to have been duly given (i) on
the date of delivery, if personally delivered to the person identified below,
(ii) three (3) days after mailing if mailed by certified or registered mail,
postage prepaid, return receipt requested, (iii) one (1) Business Day after
delivery to any overnight express courier service, and (iv) on the Business Day
of receipt if sent by facsimile or other customary means of telecommunication,
provided receipt thereof is electronically or orally confirmed and a copy
thereof is sent in the manner provided by clause (i) hereof, addressed as
follows:

	 	(a) 	If to the Seller: 
	 	  	  
	 	  	Gryphon Gold Corporation 
	 	  	611 North Nevada Street 
	 	  	Carson City, Nevada 89703 
	 	  	Attention: Jim O’Neil 
	 	  	Facsimile: 604-608-3262 
	 	  	  
	 	(b) 	If to the Purchaser: 
	 	  	  
	 	  	Waterton Global Value, L.P. 
	 	  	Borealis Holdings LLC 
	 	  	Folio House 
	 	  	P.O. Box 800 
	 		Road Town, Tortola, VG1110 
	 	  	British Virgin Islands 
	 	  	Attention: Peter Poole 
	 	  	Facsimile: (284) 494-8356/7422 
	 	  	  
	 	  	with a copy (not constituting notice) to:

	 	  	  
	 	  	Davis Graham & Stubbs LLP 
	 	  	1550 Seventeenth Street, Suite 500 
	 	  	Denver, Colorado 80202 
	 	  	Attention: Joel Benson, Esq. 
	 	  	Telephone: 303-892-9400 
	 	  	Facsimile: 303-893-1379 

     Such addresses may be changed,
from time to time, by means of a notice given in the manner provided in this
Section 9.3. Copies delivered to outside counsel shall not constitute
notice.

     9.4 Severability. If any
provision of this Agreement is held to be unenforceable for any reason, it shall
be adjusted rather than voided, if possible, in order to achieve the intent of
the Parties to this Agreement to the extent possible. In any event, all other
provisions of this Agreement shall be deemed valid and enforceable to the
fullest extent possible.

     9.5 Waiver; Survival.
Waiver of any term or condition of this Agreement by either of the respective
Parties shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition, of this Agreement. Except
as otherwise specifically provided herein, the rights and obligations of
Purchaser and the Seller contained herein shall survive the Closing.

-48-

     9.6 Binding Effect;
Assignment. This Agreement is binding upon and inures to the benefit of each
Party hereto and each Party’s respective successors and assigns. The Purchaser
hereto may assign its rights and obligations under this Agreement, or any
portion of such rights and obligations, including all or any portion of the
Purchased Membership Interest, to one or more Affiliates or other persons
without the consent of the other Parties.

     9.7 Counterparts. This
Agreement may be signed in any number of counterparts with the same effect as if
the signatures to each counterpart were upon a single instrument, and all such
counterparts together shall be deemed to constitute an original and the same
instrument.

     9.8 Governing Law; Consent to
Jurisdiction.

          (a)
This Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Colorado without regard to its conflict of laws
principles. 

          (b)
Each of the Parties hereto hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any Colorado state
court in any action or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby or for recognition or enforcement of any
judgment relating thereto, and each of the Parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such Colorado state court or, to the
extent permitted by law, in federal court. Each of the Parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment of in any other
manner provided by Law.

          (c)
Each of the Parties hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any Colorado state court. Each of the Parties hereto hereby
irrevocably and unconditionally waives, to the fullest extent permitted by Law,
the defense of any inconvenient forum to the maintenance of such action or
proceeding in such court.

          (d)
Each Party hereto acknowledges and agrees that any controversy which may arise
under this Agreement is likely to involve complicated and difficult issues, and,
therefore, it hereby irrevocably and unconditionally waives any right it may
have to a trial by jury in respect of any litigation directly or indirectly
arising out of or relating to this Agreement or the transactions contemplated
hereby.

     9.9 Specific Performance.
Each of the Seller and the Purchaser acknowledges and agrees that the other
would be irreparably damaged if any of the provisions of this Agreement are not
performed in accordance with their specific terms and that any breach of this
Agreement by the Seller or Purchaser could not be adequately compensated in all
cases by monetary damages alone. Accordingly, in addition to any other right or remedy to
which the Purchaser or the Seller may be entitled, at law or in equity, each
shall be entitled to enforce any provision of this Agreement by a decree of
specific performance and to temporary, preliminary and permanent injunctive
relief to prevent breaches of any of this provisions of this Agreement, without
posting any bond or other undertaking.

-49-

     9.10 Headings. The
headings in this Agreement have been included solely for ease of reference and
shall not be considered in the interpretation or construction of this
Agreement.

     9.11 Exhibits and
Schedules. The Exhibits and Schedules to this Agreement form part of this
Agreement and are incorporated herein by reference and expressly made a part
hereof.

     9.12 Electronic
Signatures. Each of the Parties hereto agrees that (i) any signed document
transmitted by facsimile transmission, e-mail, portable document format (.pdf)
or other electronic transmission shall be treated in all manner and respects as
an original document, (ii) the signature of any Party on such a document shall
be considered an original for all purposes under this Agreement and the
Transaction Documents, (iii) any document signed by facsimile, e-mail, portable
document format (.pdf) or other electronic transmission shall be considered to
have the same binding and legal effect as an original document and (iv) at the
request of any Party hereto, any such document shall be re-executed by all of
the Parties hereto in its original form. Each of the Parties further agrees that
they shall never raise the use of a signature transmitted by facsimile, e-mail,
portable document format (.pdf) or other electronic transmission as a defense to
this Agreement or any Transaction Document and hereby forever waives such
defense.

     9.13 Acknowledgements.
Each of the Parties hereto hereby confirms and acknowledges that:

          (a)
it has been advised by its own legal counsel in the negotiation, preparation,
execution and delivery of this Agreement and each other Transaction Document;

          (b)
this Agreement and the other Transaction Documents shall not be construed
against any party or more favourably in favor of any party based upon which
party drafted the same, it being agreed and acknowledged that all parties
contributed substantially to the negotiation and preparation of this Agreement
and the other Transaction Documents;

          (c)
the Purchaser has no fiduciary relationship with or duty to the Seller or the
Company arising out of or in connection with this Agreement or any other
agreement, arrangement, instrument or investment, and the relationship between
the Purchaser, on one hand, and the Seller and the Company, on the other hand,
in connection herewith is solely that of arms-length contractual
counter-parties;

          (d)
neither this Agreement nor the transactions contemplated hereby create a joint
venture, partnership, agency relationship or fiduciary duty, and no joint
venture, partnership, agency relationship or fiduciary duty shall be deemed to
exist, between the Purchaser and the Seller;

-50-

          (e)
the Purchaser is and has been acting solely as a principal and the Purchaser has
not been, is not, and will not be, acting as an advisor, agent or fiduciary for
the Seller;

          (f)
the Purchaser may be engaged in a broad range of transactions that involve
interests that differ from those of the Seller, the Company and their
Affiliates, and the Purchaser has no obligation to disclose any of such
interests to the Seller, the Company or their Affiliates; and

          (g)
neither the Seller nor the Company will claim that the Purchaser has rendered
advisory services of any nature or with respect to, or owes a fiduciary or
similar duty to, the Seller or the Company in connection with this Agreement,
the other Transaction Documents, the transactions contemplated hereby or
thereby, or the process leading thereto.

[Signature pages follow]

-51-

     IN WITNESS WHEREOF, the Parties
hereto have caused this Agreement to be duly executed and delivered with legal
and binding effect by their respective authorized representatives as of the day
and year first above written.

	 	SELLER: 
	 	GRYPHON GOLD CORPORATION

	 	 	  
	 	By: 	
	 	 	Name: James T. O’Neil Jr. 
	 	 	Title: President and CEO 
	 	 	  
	 	THE COMPANY: 
	 	BOREALIS MINING COMPANY LLC
  
	 	 	  
	 	By: 	
	 	 	Name: James T. O’Neil Jr. 
	 	 	Title: Manager 
	 	 	  
	 	PURCHASER: 
	 	WATERTON GLOBAL VALUE, L.P.,
      BY ITS 
	 	INVESTMENT MANAGER ALTITUDE 
	 	MANAGEMENT LTD. 
	 	 	  
	 	By: 	
	 	 	Authorized Signatory 
	 	 	  
	 	BOREALIS HOLDINGS LLC 
	 	 	  
	 	By: 	
	 	 	Name: Richard J. Wells 
	 	 	Title: Manager 

[Contribution Agreement Signature Page]Gryphon Gold Corporation: Exhibit 10.2 - Filed by newsfilecorp.com

Execution Version

BOREALIS MINING COMPANY LLC

A Nevada Limited Liability Company

	 
	AMENDED AND RESTATED LIMITED LIABILITY COMPANY
      AGREEMENT 
	 
	January 30, 2013 
	 

THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED BY THIS
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY OTHER APPLICABLE SECURITIES LAWS. SUCH LIMITED LIABILITY
COMPANY INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED AT
ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR, IN EACH
CASE, EXEMPTION THEREFROM, AND IN COMPLIANCE WITH THE OTHER SUBSTANTIAL
RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.

TABLE OF CONTENTS

	  	  	Page 
	  	  	  
	ARTICLE
      1 	DEFINITIONS
      	2
      
	     Section
      1.1 	Definitions
      	2
      
	  	  	  
	ARTICLE
      2 	FORMATION
      AND PURPOSE 	11
      
	     Section
      2.1 	Formation
      	11
      
	     Section
      2.2 	Name
      	11
      
	     Section
      2.3 	Registered
      Office/Agent 	11
      
	     Section
      2.4 	Term
      	11
      
	     Section
      2.5 	Purpose
      	11
      
	     Section
      2.6 	Powers;
      Ownership of Property 	11
      
	     Section
      2.7 	Certificate
      	12
      
	     Section
      2.8 	Principal
      Office 	12
      
	     Section
      2.9 	No
      State-Law Partnership 	12
      
	  	  	  
	ARTICLE
      3 	MEMBERSHIP,
      CAPITAL CONTRIBUTIONS AND UNITS 	12
      
	     Section
      3.1 	Members
      	12
      
	     Section
      3.2 	Member
      Interests and Units 	12
      
	     Section
      3.3 	Voting
      	12
      
	     Section
      3.4 	Specific
      Limitations 	13
      
	     Section
      3.5 	Additional
      Members and Units 	13
      
	     Section
      3.6 	Capital
      Contributions 	13
      
	     Section
      3.7 	Remedies
      For Failure to Meet Cash Calls 	14
      
	     Section
      3.8 	Security
      Interest 	17
      
	     Section
      3.9 	Call
      Notice 	17
      
	     Section
      3.10 	Certification
      	17
      
	     Section
      3.11 	Deemed
      Resignation; Elimination of Minority Interest 	18
      
	  	  	  
	ARTICLE
      4 	CAPITAL
      ACCOUNTS 	19
      
	     Section
      4.1 	Capital
      Accounts 	19
      
	     Section
      4.2 	Revaluations
      of Assets and Capital Account Adjustments 	19
      
	     Section
      4.3 	Additional
      Capital Account Adjustments 	20
      
	     Section
      4.4 	Additional
      Capital Account Provisions 	20
      
	  	  	  
	ARTICLE
      5 	DISTRIBUTIONS
      AND ALLOCATIONS OF PROFIT AND LOSS 	20
      
	     Section
      5.1 	Distributions
      	20
      
	     Section
      5.2 	No
      Violation 	21
      
	     Section
      5.3 	Withholding;
      Tax Indemnity 	21
      
	     Section
      5.4 	Property
      Distributions and Installment Sales 	22
      
	     Section
      5.5 	Net
      Profit or Net Loss 	22
      
	     Section
      5.6 	Regulatory
      Allocations 	23
      
	     Section
      5.7 	Tax
      Allocations 	23
      
	     Section
      5.8 	Changes
      in Members’ Interests 	24
      
	  	  	  
	ARTICLE
      6 	STATUS,
      RIGHTS AND POWERS OF UNIT HOLDERS 	24
      
	     Section
      6.1 	Limited
      Liability 	24
      
	     Section
      6.2 	Return
      of Distributions of Capital 	25
      
	     Section
      6.3 	No
      Management or Control 	25
      

i

TABLE OF CONTENTS 
(continued)

	  	  	Page
	  	  	  
	ARTICLE
      7 	DESIGNATION,
      RIGHTS, AUTHORITIES, POWERS, RESPONSIBILITIES AND DUTIES OF THE BOARD OF
      MANAGERS 	25
      
	     Section
      7.1 	Board
      of Managers 	25
      
	     Section
      7.2 	Authority
      of Board of Managers 	26
      
	     Section
      7.3 	Reliance
      by Third Parties 	27
      
	     Section
      7.4 	Directors’
      and Officers’ Insurance 	27
      
	  	  	  
	ARTICLE
      8 	DESIGNATION,
      RIGHTS, AUTHORITIES, POWERS, RESPONSIBILITIES AND DUTIES OF OFFICERS AND
      AGENTS 	27
      
	  	  	  
	ARTICLE
      9 	BOOKS,
      RECORDS, ACCOUNTING AND REPORTS 	28
      
	     Section
      9.1 	Books
      and Records 	28
      
	     Section
      9.2 	Reports
      	28
      
	     Section
      9.3 	Filings
      	28
      
	     Section
      9.4 	Non-Disclosure
      	28
      
	  	  	  
	ARTICLE
      10 	TAX
      MATTERS MEMBER 	29
      
	     Section
      10.1 	Tax
      Matters Member 	29
      
	     Section
      10.2 	Indemnity
      of Tax Matters Member 	29
      
	     Section
      10.3 	Tax
      Returns 	30
      
	  	  	  
	ARTICLE
      11 	TRANSFER
      OF INTERESTS 	30
      
	     Section
      11.1 	Restricted
      Transfer 	30
      
	     Section
      11.2 	Permitted
      Transferees 	31
      
	     Section
      11.3 	Transfer
      Requirements 	31
      
	     Section
      11.4 	Consent
      	32
      
	     Section
      11.5 	Withdrawal
      of Member 	32
      
	     Section
      11.6 	Additional
      Transfer Restrictions 	32
      
	     Section
      11.7 	Right
      of First Refusal 	33
      
	     Section
      11.8 	Amendment
      of Schedule 3.1 	33
      
	  	  	  
	ARTICLE
      12 	“DRAG
      ALONG” AND “TAG ALONG” RIGHTS 	34
      
	     Section
      12.1 	Drag
      Along 	34
      
	     Section
      12.2 	Tag
      Along 	34
      
	     Section
      12.3 	Miscellaneous
      	36
      
	  	  	  
	ARTICLE
      13 	PRE-EMPTIVE
      RIGHTS 	37
      
	     Section
      13.1 	Pre-emptive
      Rights 	37
      
	     Section
      13.2 	Participation
      Notice 	38
      
	     Section
      13.3 	Participation
      Commitment 	38
      
	     Section
      13.4 	Acceptance
      	38
      
	     Section
      13.5 	Failure
      to Consummate 	39
      
	     Section
      13.6 	Cooperation
      	39
      
	     Section
      13.7 	Closing
      	39
      
	     Section
      13.8 	Exceptions
      	39
      
	     Section
      13.9 	Compliance
      	39
      

ii

TABLE OF CONTENTS 
(continued)

	  	  	Page 
	  	  	  
	ARTICLE
      14 	PROGRAMS
      AND BUDGETS 	40
      
	     Section
      14.1 	Operations
      Under Programs and Budgets 	40
      
	  	  	  
	ARTICLE
      15 	DISSOLUTION
      OF COMPANY 	40
      
	     Section
      15.1 	Termination
      of Membership 	40
      
	     Section
      15.2 	Events
      of Dissolution 	40
      
	     Section
      15.3 	Liquidation
      	40
      
	     Section
      15.4 	No
      Action for Dissolution 	41
      
	     Section
      15.5 	No
      Further Claim 	41
      
	     Section
      15.6 	Distribution
      of Subsidiary Equity 	41
      
	  	  	  
	ARTICLE
      16 	INDEMNIFICATION
      	41
      
	     Section
      16.1 	Indemnification
      Rights 	41
      
	     Section
      16.2 	Exculpation
      	42
      
	     Section
      16.3 	Persons
      Entitled to Indemnity 	43
      
	     Section
      16.4 	Procedure
      Agreements 	43
      
	     Section
      16.5 	Interested
      Transactions 	43
      
	     Section
      16.6 	Business
      Opportunities 	43
      
	     Section
      16.7 	Reliance,
      Etc 	44
      
	  	  	  
	ARTICLE
      17 	REPRESENTATIONS
      AND COVENANTS BY THE MEMBERS 	44
      
	     Section
      17.1 	Investment
      Intent 	44
      
	     Section
      17.2 	Securities
      Regulation 	44
      
	     Section
      17.3 	Knowledge
      and Experience 	45
      
	     Section
      17.4 	Economic
      Risk 	45
      
	     Section
      17.5 	Binding
      Agreement 	45
      
	     Section
      17.6 	Tax
      Position 	45
      
	     Section
      17.7 	Information
      	45
      
	     Section
      17.8 	Tax
      and Other Advice 	45
      
	     Section
      17.9 	Licenses
      and Permits 	45
      
	     Section
      17.10 	Indemnities
      	46
      
	     Section
      17.11 	Takeover
      Proposals 	46
      
	  	  	  
	ARTICLE
      18 	COMPANY
      REPRESENTATIONS AND COVENANTS 	46
      
	     Section
      18.1 	Duly
      Formed 	46
      
	     Section
      18.2 	Valid
      Issue 	46
      
	  	  	  
	ARTICLE
      19 	AMENDMENTS
      TO AGREEMENT 	46
      
	     Section
      19.1 	Amendments
      	46
      
	     Section
      19.2 	Corresponding
      Amendment of Certificate 	46
      
	     Section
      19.3 	Binding
      Effect 	47
      
	  	  	  
	ARTICLE
      20 	GENERAL
      	47
      
	     Section
      20.1 	Public
      Offering; Right to Convert to Corporate Form 	47
      
	     Section
      20.2 	Successors
      and Assigns; Etc 	48
      
	     Section
      20.3 	Notices,
      Etc 	48
      
	     Section
      20.4 	Area
      of Interest; Abandonment of Claims 	49
      

iii

TABLE OF CONTENTS 
(continued)

	  	  	Page 
	  	  	  
	Section
      20.5 	Execution
      of Documents; Further Assurances 	49
      
	Section
      20.6 	Governing
      Law; Nevada Law 	50
      
	Section
      20.7 	Consent
      to Jurisdiction and Service of Process; Waiver of Jury Trial 	50
      
	Section
      20.8 	Severability
      	50
      
	Section
      20.9 	Construction
      	50
      
	Section
      20.10 	Table
      of Contents, Headings 	50
      
	Section
      20.11 	No
      Third-Party Rights 	50
      
	Section
      20.12 	Entire
      Agreement 	51
      
	Section
      20.13 	Effect
      of Waiver or Consent 	51
      
	Section
      20.14 	Counterparts
      and Facsimile 	51
      
	Section
      20.15 	Offset
      	51
      
	Section
      20.16 	Adjustment
      of Numbers 	51
      
	Section
      20.17 	Business
      Days 	51
      
	Section
      20.18 	Survival
      	52
      
	Section
      20.19 	Force
      Majeure 	52
      
	Section
      20.20 	Designees
      	52
      
	Section
      20.21 	Gender
      	52
      
	Section
      20.22 	Use
      of Trademarks, Logos 	52
      
	Section
      20.23 	Investigations,
      Criminal Matters 	52
      
	Section
      20.24 	Information
      Rights 	52
      
	Section
      20.25 	Rule
      Against Perpetuities 	52
      
	Section
      20.26 	Outside
      Business Activities of Waterton 	53
      
	Section
      20.27 	Termination
      of Agreement 	55
      

iv

BOREALIS MINING COMPANY LLC

AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT

     This Amended and Restated Limited
Liability Company Agreement of BOREALIS MINING COMPANY LLC, a Nevada limited
liability company (the “Company”), dated and effective as of January 30,
2013 (the “Effective Date”), is entered into by and among:

	 	i) 	
      BOREALIS HOLDINGS LLC, a Nevada limited liability
      company (together with its affiliates, successors and assigns,
      “Waterton”);

	 	 	 
	 	ii) 	
      GRYPHON GOLD CORPORATION, a corporation organized
      and existing under the laws of Nevada (“Gryphon”);

	 	 	 
		iii) 	
      such other Persons who from time to time become party
      hereto by executing a joinder to this Agreement substantially in the form
      of Exhibit A hereto and comply with the other conditions set forth
      in this Agreement and the Act (with (i) through (iii) collectively, the
      “Members”); and

	 	 	 
	 	iv) 	
      the Company.

RECITALS

     WHEREAS, the Members desire to
enter into this Agreement to provide for certain agreements governing the
business and affairs of the Company and its Subsidiaries as set forth herein;

     WHEREAS, pursuant to the terms of
that certain Contribution Agreement, dated as of the date hereof (the
“Contribution Agreement”), by and among Gryphon, the Company, Waterton
and Waterton Global Value, L.P., Waterton purchased and acquired sixty percent
(60%) of the membership interests of the Company; 

     WHEREAS, upon the execution of
this Agreement, the membership interests of the Company are being evidenced by
one class of Units, designated herein as the Class A Units;

     WHEREAS, upon the execution of
this Agreement, (i) Waterton’s membership interests will be evidenced by
6,000,000 Class A Units, representing a sixty percent (60%) ownership interest
in the Company, and (ii) Gryphon’s membership interests will be evidenced by
4,000,000 Class A Units, representing a forty percent (40%) ownership interest
in the Company; and

     WHEREAS, the parties hereto
desire to enter into this Agreement to provide for certain agreements governing
the business, affairs and operations of the Company as set forth herein.

     NOW, THEREFORE, in consideration
of the mutual promises made herein and other good and valuable consideration,
the parties hereto agree as follows:

1

AGREEMENT

ARTICLE 1 
DEFINITIONS

     Section 1.1 Definitions.

     For purposes of this Agreement (a)
certain capitalized terms have specifically defined meanings set forth below,
(b) references to “Articles,” “Exhibits” and “Sections” are to Articles,
Exhibits and Sections of this Agreement unless explicitly indicated otherwise,
(c) references to statutes include all rules and regulations thereunder, and all
amendments and successors thereto from time to time, and (d) the word
“including” will be construed as “including without limitation.”

“43-101 Report” means a mineral
resource classification report prepared in accordance with the standards and
requirements set forth in National Instrument 43-101 or any comparable mineral
resource report prepared by a qualified and industry accepted independent
consultant in accordance with applicable industry and regulatory standards.

“Act” means the Nevada Limited
Liability Company Act (N.R.S §§ 86.011 -86.541, et seq.), as amended.

“Adjusted Quorum” is defined in
Schedule 7.1.

“Affiliate” means with respect
to any specified Person, (a) any Person that directly or through one or more
intermediaries controls or is controlled by or is under common control with the
specified Person or (b) any Person who is a general partner, member, managing
director, manager, officer, director or principal of the specified Person. As
used in this definition, the term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.

“Affiliate Indemnitors” is
defined in Section 16.1(b) .

“Affiliated Fund” means each
corporation, trust, limited liability company, general or limited partnership or
other entity controlling or under common control with Waterton.

“Agreement” means this Limited
Liability Company Agreement of the Company, as amended, modified, supplemented
or restated from time to time.

“Ancillary Documents” is defined
in Section 12.2(a) . 

“Area of Interest” is defined in
Section 20.4. 

“Asset Sale” is defined in
Section 5.1(c) .

“Asset Value” of any property of
the Company means its adjusted basis for U.S. federal income tax purposes
unless:

	 	(a) 	
      the property was accepted by the Company as a
      contribution to capital at a value different from its adjusted basis, in
      which event the initial Asset Value for such property means the gross Fair
      Market Value of the property agreed to by the Company and the contributing
      Member; or

2

	 	(b) 	
      the property of the Company is revalued in accordance
      with Section 4.2, in which event the Asset Values for such property will
      equal the Fair Market Values established pursuant to such
    revaluation.

Asset Value of each asset will be
increased or decreased to reflect any adjustment to the adjusted basis of the
asset under Section 734(b) or 743(b) of the Code, but only to the extent that
the adjustment is taken into account in determining Capital Accounts under
Treasury Regulation § 1.704 -1(b)(2)(iv)(m).

As of any date, references to the “then
prevailing Asset Value” of any property means the Asset Value last determined
for such property less the depreciation, amortization and cost recovery
deductions taken into account in computing Net Profit or Net Loss in fiscal
periods (or portions thereof) subsequent to such prior determination date.

“Assignee” is defined in Section
11.1(c) . 

“Assignor” is defined in Section
11.1(b) . 

“Board Manager” is defined in
Schedule 7.1.

“Board of Managers” means the
board of managers designated and determined as provided in Schedule 7.1.

“Budget” means a detailed budget
and cashflow forecast relating to exploration, development, management and
operation of the Properties and all other Operations together with all general
and administrative costs and expenses and other related costs and expenses,
including information with respect to all costs to be incurred and expenditures
to be made with respect to the Properties, as well as a schedule of Capital
Contributions to be made by the Members with respect to a Program, as approved
by the Board of Managers.

“Business Day” means a day other
than a Saturday, Sunday or other day on which commercial banks in New York, NY
or Toronto, ON are authorized or required to close.

“Call Notice” is defined in
Section 3.9(a) .

“Capital Account” is defined in
Section 4.1.

“Capital Contribution” means
with respect to any Member, the sum of (a) the amount of money and (b) the Fair
Market Value of any other property (net of liabilities assumed by the Company or
to which the property is subject) contributed or deemed to have been contributed
by such Member to the Company with respect to the Interest held by such Member
pursuant to this Agreement.

“Certificate” means the
Certificate of Formation of the Company and any amendments thereto and
restatements thereof filed on behalf of the Company with the Secretary of State
of the State of Nevada pursuant to the Act.

“Change in Control” means any
transaction or series of transactions pursuant to which any Person(s) or group
of Persons acting together other than Waterton and its Affiliates in the
aggregate acquire(s) directly over 50% of the Class A Units or of the assets (as
determined by Fair Market Value) of the Company and its Subsidiaries determined
on a consolidated basis.

3

“Chargee” is defined in Section
11.6.

“Class” when used with reference
to a Unit, means the class of Units of which such Unit is a part.

“Class A Member” means a Person
in regard to such Person’s particular Interest in Class A Units.

“Class A Units” is defined in
Section 3.2.

“Code” means the Internal
Revenue Code of 1986, as amended.

“Company” means the limited
liability company formed by virtue of this Agreement and the filing of the
Certificate in accordance with the Act.

“Confidential Information” is
defined in Section 9.4.

“Control” means (a) the
ownership, directly or indirectly, of fifty percent (50%) or more of the voting
equity share capital of a specific Person or (b) the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities or
general partnership or managing member interests or other ownership interests,
by contract or otherwise. “Controlling” and “Controlled” shall have the
correlative meanings. Without limiting the generality of the foregoing, a Person
shall be deemed to Control any other Person of which it owns, directly or
indirectly, a majority of the ownership or voting interests.

“Credit Agreement” is defined in
Section 20.26(a) . 

“Credit Documents” is defined in
Section 20.26(a) . 

“Credit Facilities” is defined
in Section 20.26(a) . 

“Cure Period” is defined in
Section 3.7(c) . 

“Default Amount” is defined in
Section 3.7(a) . 

“Default Loan” is defined in
Section 3.7(b) .

“Default Rate” means the
then-applicable LIBOR (London Interbank Offered Rate) for any date of reference
plus ten percent (10%) calculated per annum; provided, that with
respect to any Default Amount outstanding during a Cure Period, the Default Rate
shall be equal to (i) ten percent (10%) per annum for the first month of the
Cure Period; (ii) twenty percent (20%) per annum for the second month of the
Cure Period, (iii) twenty percent (20%) per annum for the third month of the
Cure Period, (iv) thirty percent (30%) per annum for the fourth month of the
Cure Period, (v) forty percent (40%) per annum for the fifth month of the Cure
Period, and (vi) forty percent per annum for the sixth month of the Cure
Period.

“Delinquent Member” is defined
in Section 3.7(a) .

“Distribution” means cash or
property (valued at its Fair Market Value and net of liabilities assumed by the
Member or its Affiliates to which such property is distributed or to which the
property is subject) distributed by the Company to a Member in respect of the
Member’s Interest in any manner. For the avoidance of
doubt, such term shall not include advisory fees, management fees, compensation
or expense reimbursements paid to a holder of Units or its Affiliates.

4

“Drag Along Notice” is defined
in Section 12.1(a) .

“Drag Along Sale” is defined in
Section 12.1(a) .

“Drag Along Sale Percentage” is
defined in Section 12.1(a) . 

“Drag Along Seller” is defined
in Section 12.1(a) . 

“Effective Date” is defined in
the Preamble of this Agreement.

“Environmental Compliance” means
actions performed during or after Operations to comply with the requirements of
all Environmental Laws or contractual commitments related to reclamation of the
Properties or other compliance with Environmental Laws.

“Environmental Laws” means Laws
aimed at or associated with reclamation or restoration of the Properties or any
other property; abatement of pollution; protection of the environment;
protection of wildlife, including endangered species; ensuring public safety
from environmental hazards; employee health and safety; mine health and safety;
protection of cultural or historic resources; management, storage,
transportation, use or control of hazardous materials and substances; releases
or threatened releases of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes into the environment, including land,
ambient air, surface water and groundwater; and all other Laws relating to the
existence, manufacture, processing, distribution, use, treatment, storage,
disposal, recycling, handling or transport of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes.

“Excluded Member” means any
Member (a) who is not an “accredited investor” (within the meaning of Rule
501(a) promulgated by the Securities and Exchange Commission), (b) whose
Participation Portion is less than 10%, or (c) who is an employee, consultant or
service provider of the Company or any of its Subsidiaries, if such Member is in
breach of any noncompetition, nonsolicitation, confidentiality or similar
restrictive provision to which such Member is bound pursuant to any employment
agreement or other agreement between such Member and the Company or any of its
Subsidiaries.

“Exempted Person” is defined in
Section 16.6.

“Fair Market Value” means, as of
any date, (i) as to any Unit, the good faith determination of the Board of
Managers of the fair value of such Unit as of the applicable reference date and
(ii) as to any property or asset, the good faith determination of the Board of
Managers of the fair value of such property or asset as of the applicable
reference date, and in each case, such fair value shall be determined by taking
into account the earnings, liabilities and other financial information of the
Company for such period of time as deemed appropriate, the prospects of the
Company and the mining industry generally, the mineral reserves of the Company,
the general condition of the financial markets, the general condition of the
gold and precious metals markets and such other customary or commercially
reasonable factors deemed appropriate by the Board of Managers.

“Force Majeure Event” means,
with respect to the Company, the Board of Managers or any Member, any cause,
condition, event or circumstance, whether foreseeable or unforeseeable, beyond its reasonable control,
including the following to the extent beyond its reasonable control: (a) labor
disputes (however arising and whether or not employee demands are reasonable or
within the power of the Member or Board of Managers to grant), (b) any actions
or inactions by any governmental authorities that delay or prevent the issuance
or granting of any Permits or other authorization required to conduct Operations
beyond the reasonable expectations of the Company, the Member or the Board of
Managers seeking the Permit or other authorization, (c) changes in Law, and
instructions, requests, judgments and orders of governmental authorities, (d)
curtailments or suspensions of activities to remedy or avoid an actual or
alleged, present or prospective violation of Environmental Laws, (e) acts of
terrorism, acts of war, and conditions arising out of or attributable to
terrorism or war, whether declared or undeclared, (f) riots, civil strife,
insurrections and rebellions, (g) fires, explosions and acts of God, including
earthquakes, storms, floods, sink holes, droughts and other adverse weather
conditions, (h) delays and failures of suppliers to supply, or of transporters
to deliver, materials, parts, supplies, services or equipment, (i) contractors’
or subcontractors’ shortage of, or inability to obtain, labor, transportation,
materials, machinery, equipment, supplies, utilities or services, (j) accidents,
(k) breakdowns of equipment, machinery or facilities, (l) actions by native
rights groups, environmental groups, or other similar special interest groups,
and (m) other similar causes, conditions, events and circumstances beyond its
reasonable control.

5

“Fiscal Year” means the fiscal
year of the Company, which will be the calendar year or such other fiscal year
as from time to time determined by the Board of Managers.

“Growth Board Managers” is
defined in Schedule 7.1.

“Gryphon” is defined in the
Recitals.

“Gryphon Board Managers” is
defined in Schedule 7.1.

“Hedging Transaction” means (a)
any and all rate swap transactions, basis swaps, credit derivative transactions,
forward rate transactions, commodity swaps, commodity options, forward commodity
contracts, forward sales, equity or equity index swaps or options, bond or bond
price or bond index swaps or options or forward bond or forward bond price or
forward bond index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, spot contracts, gold or silver streaming contracts, mineral supply
agreements or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or
not any such transaction is governed by or subject to any Master Agreement, and
(b) any and all transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any Master
Agreement, including any such obligations or liabilities under any Master
Agreement. “Master Agreement” means any form of master agreement published by
the International Swaps and Derivatives Association, Inc., any International
Foreign Exchange Master Agreement, or any other master agreement, together with
any related schedules.

“Indemnified Persons” is defined
in Section 16.1.

“Indirect Transfers” is defined
in Section 11.1(e) .

“Initial Contribution Date”
means (a) for the holders of Units as of the date hereof, the date of this
Agreement and (b) for each other Person who is hereafter admitted as a Member in
accordance with the terms of Article 11 and the Act, the date of such
admission.

6

“Initial Gryphon Contribution”
is defined in Section 3.6(b) .

“Interest” means, with respect
to any Person as of any time, such Person’s limited liability company interest
in the Company, which includes the number of Units such Member holds and such
Person’s Capital Account balance. When expressed as a percentage or fraction, a
Person’s Interest shall mean the ratio of the number of Units owned by that
Person to the total number of outstanding Units. For purposes of certainty,
“Interest” shall not mean, and shall not be deemed to include, a Net Profit
Interest.

“Issuance” is defined in Section
13.1.

“Laws” means any law, statute,
code, ordinance, treaty, order, rule, regulation, judgment, ruling, decree,
injunction, franchise, permit, certificate, license, authorization, approval or
other direction or requirement (including Environmental Laws, permits associated
with the Properties, energy regulations, occupational, safety and health
standards or controls, taxation laws and securities laws and regulations) of any
federal, state, provincial, local, territorial, county, municipal, tribal,
aboriginal or other governmental authority.

“Leased Property” means all real
property rights, titles and interests, whether fee, surface, subsurface,
mineral, water or otherwise, leased or used by the Company, including the
undivided 100% interest in those patented and unpatented mining claims as more
particularly described as the “Leased Property” in Schedule 1.1(a) .

“Liabilities” means all
liabilities of the Company which in accordance with generally accepted
accounting principles should be carried as liabilities on the balance sheet of
the Company.

“Members” is defined in the
Preamble.

“Net Profit” and “Net Loss”
are defined in Section 5.5.

“Net Profit Interest” means an
interest in the Net Profits of the Company, which consists of a right to receive
a proportion of such Net Profits corresponding to the percentage set out in
Section 3.11, which payments shall be made to the holder of the Net Profit
Interest on a monthly basis (to the extent any Net Profits are payable for such
month). For purposes of certainty, a “Net Profit Interest” shall not mean, and
shall not be deemed to be, an Interest.

“Non-Defaulting Member” is
defined in Section 3.7(a) .

“Notice” is defined in Section
20.3.

“Notified Member” is defined in
Section 11.7. 

“Offer Notice” is defined in
Section 11.7.

 “Offered Interest” is
defined in Section 11.7. 

“Offered Price” is defined in
Section 11.7. 

“Offered Terms” is defined in
Section 11.7.

“Operations” means the business,
operations and activities of the Company.

7

“Other Investments” is defined
in Section 20.26(a) .

“Owned Property” means all real
property rights, titles and interests, whether fee, surface, subsurface,
mineral, water or otherwise, including patented and unpatented lode and placer
mining claims, owned, held, or controlled by the Company, including the
undivided 100% interest in those patented and unpatented mining claims as more
particularly described as the “Owned Property” in Schedule 1.1(a) .

“Participating Seller” is
defined in Section 12.2(a) .

“Participation Buyer” is defined
in Section 13.3.

“Participation Commitment” is
defined in Section 13.3.

“Participation Notice” is
defined in Section 13.2. 

“Participation Portion” is
defined in Section 13.2(a) . 

“Per Share Offering Price” is
defined in Section 20.1(a) . 

“Permitted Transferee” is
defined in Section 11.2.

“Person” means an individual,
partnership, joint venture, association, corporation, trust, estate, limited or
unlimited liability company, limited liability partnership, limited partnership,
unincorporated entity of any kind, governmental entity, or any other legal
entity.

“Pre-Offering Company Value” is
defined in Section 20.1(a) .

“Program” means a description,
in reasonable detail, of the Operations to be conducted and the objectives to be
accomplished by the Board of Managers for a year or any longer period.

“Properties” means (a) the Owned
Property and the Leased Property, together with all water and water rights,
easements, access rights, rights-of-way and other appurtenances attached to or
associated with the Owned Property or the Leased Property, and (b) all other
interests in real property within the Area of Interest that are acquired by the
Company.

“Prospective Buyer” is defined
in Section 12.1.

“Prospective Subscriber” is
defined in Section 13.2(a) .

“Public Offering” means a public
offering and sale of the common equity of the Company, equity of any entity with
Control over the Company, or any direct or indirect Subsidiary of the Company
for cash registered under the Securities Act filed with the Securities and
Exchange Commission on Form S-1 (or a successor form adopted by the Securities
and Exchange Commission) or any equivalent Canadian commission; provided that
the following will not be considered a Public Offering: (a) any issuance of
common equity interests as consideration for a merger or acquisition or (b) any
issuance of common equity interests or rights to acquire common equity interests
to existing equityholders or to employees of the Company or its Subsidiaries on
Form S-4 or Form S-8 (or a successor form adopted by the Securities and Exchange
Commission) or otherwise.

“Purchasing Holder” is defined
in Section 13.9.

8

“Quorum” is defined in Schedule
7.1.

“Regulations” means the income
tax regulations promulgated under the Code, as in effect from time to time.

“Regulatory Allocations” is
defined in Section 5.6.

“Related Party” means (a) each
individual who is, or who has at any time been, an officer, director or manager,
as applicable, of the Company or any of its Subsidiaries, and (b) any trust or
other entity (other than the Company) in which any one of the individuals
referred to in clause (a) above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary, equity or other financial interest.

“Representative” means, with
respect to any Person, any director, manager, officer, employee, partner, agent,
financing source, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.

“Resignation Effective Date” is
defined in Section 3.1(a) .

“Royalty” shall mean any share
of mineral production, including, gross smelter return royalties, net smelter
return royalties, overriding royalties, non-participating royalties, production
payments, net profit interests and all other mineral royalties of every type and
characterization, whether constituting a real property or a personal property
interest.

“Sale of the Company” means (i)
the direct or indirect sale of all or substantially all of the Interests or
assets of the Company and its Subsidiaries, taken as a whole (whether by merger,
consolidation, recapitalization, transfer of equity securities, purchase and
sale or otherwise) or (ii) any dissolution of the Company in accordance with
this Agreement; provided that for greater certainty, a sale of all of the
shares of Gryphon shall not be considered to be a Sale of the Company.

“Securities Act” means the
Securities Act of 1933 and applicable rules and regulations thereunder, or any
equivalent Canadian law.

“Securities and Exchange Commission”
means the U.S. Securities and Exchange Commission and any successor
governmental agency or regulatory body.

“Selling Member” is defined in
Section 11.7.

“Subject Securities” is defined
in Section 13.1.

“Subsidiary” means, with respect
to any Person, any corporation, limited liability company, partnership,
association or business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a limited liability company, partnership, association or
other business entity (other than a corporation), a majority of the partnership
or other similar ownership interests thereof are at the time owned or
controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
Persons will be deemed to have a majority ownership interest in a limited
liability company, partnership, association or other
business entity (other than a corporation) if such Person or Persons will be
allocated a majority of limited liability company, partnership, association or
other business entity gains or losses or will be or control any managing
director or general partner of such limited liability company, partnership,
association or other business entity. For purposes hereof, references to a
“Subsidiary” of any Person will be given effect only at such times that such
Person has one or more Subsidiaries, and, unless otherwise indicated, the term
“Subsidiary” refers to any direct or indirect Subsidiaries of the Company.

9

“Supply Agreements” is defined
in Section 20.26(a) . 

“Tag Along Holder” is defined in
Section 12.2(a) .

 “Tag Along Notice” is
defined in Section 12.2(a) . 

“Tag Along Offer” is defined in
Section 12.2(b) . 

“Tag Along Seller” is defined in
Section 12.2(b) . 

“Tag Along Transfer” is defined
in Section 12.2.

“Tag Along Transfer Percentage”
is defined in Section 12.2(a)(i) .

“Takeover Proposal” is defined
in Section 17.11

“Target Capital Account” means
an account maintained for each Member which shall be the same as the Member’s
Capital Account, as increased by the Members’ shares of “minimum gain” and
“partner minimum gain” (as such terms are used in Regulation Section 1.704 -2),
and increased with respect to a Member by any amount that the Member is
unconditionally required to restore to the Company,

“Tax Distributions” is defined
in Section 5.1.

“Tax Matters Member” is defined
in Section 10.1.

“Transfer” means any sale,
assignment, pledge, mortgage, exchange, hypothecation, charge, grant of a
security interest, lien, encumbrance, abandonment, disposition or other direct
or indirect transfer, conveyance or encumbrance (whether with or without
consideration, whether voluntarily or involuntarily, whether by operation of
law, whether by foreclosure, exercise of remedies, right of action, or
otherwise). The terms “Transferee,” “Transferor,” “Transferred” and other forms
of the word “Transfer” will have the meanings correlative to the foregoing.

“Units” means each of the Class
A Units and any other class of units of the Company that are a measure of a
Member’s share of Net Profit and Net Loss of the Company as provided in Article
5.

“Waterton” is defined in the
Recitals.

“Waterton Board Manager” is
defined in Schedule 7.1.

“Waterton Group Member” means
Waterton, any Affiliated Fund, any Affiliate of Waterton and any Waterton
Permitted Transferee.

“Waterton Units” is defined in
  Section 12.2.

10

 ARTICLE 2 

FORMATION AND PURPOSE

     Section 2.1 Formation.

     The Company was formed as a
limited liability company in accordance with the Act by the filing of the
Certificate with the Secretary of State of the State of Nevada on January 30,
2013. The Members agree to continue the Company as a limited liability company
under the Act, upon the terms and subject to the conditions set forth in this
Agreement. The rights, powers, duties, obligations and liabilities of the
Members will be determined pursuant to this Agreement and, to the extent
required by the Act, by the Act. To the extent that the rights, powers, duties,
obligations or liabilities of any Member are different by reason of any
provision of this Agreement than they would be in the absence of such provision,
this Agreement will, to the extent permitted by the Act, control.

     Section 2.2 Name. 

     The name of the Company is
“Borealis Mining Company LLC.” The business of the Company may be conducted
under that name or, upon compliance with applicable Laws, any other name that
the Board of Managers deems appropriate. The Board of Managers may change the
name of the Company at any time and from time to time. Prompt notification of
any such change will be given to all Members. The Board of Managers will file,
or will cause to be filed, any fictitious name certificates and similar filings,
and any amendments thereto, that the Board of Managers considers
appropriate.

     Section 2.3 Registered
Office/Agent. 

     The registered office required to
be maintained by the Company in the State of Nevada pursuant to the Act will
initially be the office and the agent so designated on the Certificate. The
Company may, upon compliance with the applicable provisions of the Act, change
its registered office or registered agent from time to time in the determination
of the Board of Managers.

     Section 2.4 Term. 

     The term of the Company will
continue indefinitely unless sooner terminated as provided herein. The existence
of the Company as a separate legal entity will continue until the cancellation
of the Certificate as provided in the Act.

     Section 2.5 Purpose. 

     Subject to the provisions of this
Agreement, the purposes for which the Company has been formed and the powers
that it may exercise, all being in furtherance, and not in limitation, of the
general powers conferred upon limited liability companies by the State of
Nevada, are: (a) to invest in, own, manage, develop and operate the current
business and Operations of the Company and its Subsidiaries; (b) in general, to
carry on any lawful business whatsoever that is calculated, directly or
indirectly, to promote the interests of the Company and its Subsidiaries or to
enhance the value of its assets; (c) to engage in such other business and
operations as may be determined by the Board of Managers; and (d) to do any and
all things incidental to the accomplishment of the foregoing purposes, or
incidental to the protection and benefit of the Company and its
Subsidiaries.

     Section 2.6 Powers;
Ownership of Property.

     (a) The Company will possess and
may exercise all of the powers and privileges granted by the Act or by any other
law together with such powers and privileges as are necessary, advisable,
incidental or convenient to, or in furtherance of the conduct, promotion or
attainment of the business purposes or activities of the Company.

11

     (b) All property and assets,
including the Properties, shall be owned, held by and titled in the name of the
Company, and no Member shall own any such property or assets in an individual
capacity.

     Section 2.7 Certificate.

     The filing of the Certificate is
hereby ratified and confirmed and the Person filing such Certificate is hereby
designated as an authorized person within the meaning of the Act to execute,
deliver and file the Certificate, and said Person and such other Persons as may
be designated from time to time by the Board of Managers are hereby designated
as authorized persons, within the meaning of the Act, to execute, deliver and
file any amendments or restatements of the Certificate or any certificate of
cancellation of the Certificate and any other certificates and any amendments or
restatements thereof necessary for the Company to qualify to do business in a
jurisdiction in which the Company may wish to conduct business.

     Section 2.8 Principal
Office. 

     The principal executive office of
the Company will be located at such place as the Board of Managers will
establish, and the Board of Managers may from time to time change the location
of the principal executive office of the Company to any other place within or
without the State of Nevada. The Board of Managers may establish and maintain
such additional offices and places of business of the Company, either within or
without the State of Nevada, as it deems appropriate.

     Section 2.9 No State-Law
Partnership. 

     The Members intend that the
Company not be a partnership (including a limited partnership) or joint venture,
and that no Member be a partner or joint venturer of any other Member by virtue
of this Agreement, for any purposes other than as set forth in the immediately
following sentence, and neither this Agreement nor any document entered into by
the Company or any Member will be construed to suggest otherwise. The Members
intend that the Company be treated as a partnership for federal and, if
applicable, state or local income tax purposes, and the Company and each Member
will file all tax returns and will otherwise take all tax and financial
reporting positions in a manner consistent with such treatment.

ARTICLE 3
MEMBERSHIP, CAPITAL CONTRIBUTIONS AND
UNITS

     Section 3.1 Members. 

     The Members of the Company will
be listed on Schedule 3.1, as from time to time amended and supplemented in
accordance with this Agreement. The Company will maintain a current list of
Members, the total amount of Capital Contributions made by each such Member, the
number and class of Units held by such Member and each Member’s Capital Account
balance. Notwithstanding any other provision of this Agreement (except Section
5.1(a) and Section 5.7(d)) or anything otherwise existing at law (whether common
or statutory) or in equity, to the fullest extent permitted by applicable law,
in taking, failing to take, voting for, consenting to or approving, or refusing
to vote for, consent to or approve, any action pursuant this Agreement, the Act
or otherwise, no Member shall have any duty (including any fiduciary duty) to
consider the interests of the Company, any other Member or any other Person, and
may solely consider its own interests or any other interests or factors that it
desires as determined in its sole discretion.

     Section 3.2 Member Interests
and Units. 

     The Interests of the Members of
the Company will be divided into Units. There will be one Class of Units, which
will initially consist of “Class A Units.” Each Class A Unit will represent an
Interest in the Company, will be designated as a Class A Unit of the Company and
will be entitled to the Distributions provided for in Article 5. The Company may
issue fractional Units, which fractional Units shall be rounded to the sixth
decimal place.

     Section 3.3 Voting. 

     Except as required by applicable
Law or as otherwise set forth herein, (a) Members shall not be entitled to any
voting rights, (b) all classes of Units shall be non-voting and (c) any action which would
otherwise be subject to a vote of Members under the Act may be taken by the
Company upon approval of the Board of Managers.

12

     Section 3.4 Specific
Limitations. 

     No Member will have the right or
power to: (a) withdraw or reduce its Capital Contribution except as provided by
the Act or in this Agreement, (b) make voluntary Capital Contributions, (c)
bring an action for partition against the Company, the Properties or any Company
assets, (d) cause the dissolution of the Company, except as set forth in this
Agreement or as required by the Act, or (e) require that property other than
cash be distributed upon any Distribution.

     Section 3.5 Additional Members
and Units. 

     Subject to Section 3.2 and
Article 13, the Board of Managers may create, authorize and issue Units in the
Company (including new or other classes or series thereof having different
rights than the Class A Units) and admit Persons as Members in exchange for such
contributions to capital (including commitments to make contributions to
capital) or such other consideration (including past or future services) and on
such terms and conditions (including vesting and forfeiture provisions) as the
Board of Managers determines. The Board of Managers will have the power to make
such amendments to this Agreement in order to provide for such powers,
designations, preferences and rights as the Board of Managers in its discretion
deems necessary or appropriate to give effect to such additional authorization
or issuance; provided that any adverse change to the rights, preferences
or obligations of a class of Units shall require the consent of the Members
holding at least a majority of the units of such class then outstanding;
provided, further, that any such amendment shall not adversely
change the rights, preferences or obligations of any Member that would be borne
disproportionately by such Member relative to other Members holding Units of the
same class under this Agreement (unless such Member consents in writing
thereto). Promptly following the issuance of Units, the Board of Managers will
cause the books and records of the Company to reflect the number of Units
issued, any Members or additional Members holding such future Units, and in the
case of Units issued other than solely in connection with the performance of
services, the Capital Contribution per Unit. Upon the execution of this
Agreement, a joinder to this Agreement in the form of Exhibit A hereto or
a counterpart of this Agreement, together with any other documents or
instruments required by the Board of Managers in connection therewith, and the
making of the Capital Contribution (if any) specified to be made at such time, a
Person will be admitted to the Company as a Member of the Company.
Notwithstanding any other provision herein, all Members hereby agree to any
amendment to this Agreement or the Certificate reasonably required for each such
purpose in the opinion of the Board of Managers.

Section 3.6 Capital Contributions.

     (a) Each Member’s initial Capital
Contribution or deemed initial Capital Contribution, if any, whether in cash or
in-kind, and the number of Units issued to such Members will be as set forth in
Schedule 3.1 or in the writing pursuant to which such Units were issued to such
Member. Any in-kind Capital Contributions will be effected by a written
assignment or such other documents as the Board of Managers will direct. Any
Member making an in-kind Capital Contribution agrees from time to time to do
such further acts and execute such further documents as the Board of Managers
may direct to evidence and perfect the Company’s interest in such in-kind
Capital Contribution.

     (b) Except as otherwise specified
in any approved Program and Budget, the Board of Managers shall have the sole
authority to determine whether or not additional Capital Contributions shall be
made to the Company. Absent a determination by the Board of Managers to
authorize a Capital Contribution or as otherwise specified in any approved
Program and Budget, a Member shall not have any obligation to make any
additional Capital Contribution. The Members shall be obligated to make
additional Capital Contributions to fund approved Programs and Budgets and to
fund additional Capital Contributions authorized by the Board of Managers, with
such Capital Contributions to be funded by the Members as follows: (i) Gryphon shall be solely responsible for
making the first Four Million Dollars ($4,000,000) in Capital Contributions (the
  “Initial Gryphon Contribution”), which amount of Capital Contributions
shall be made by Gryphon without any increase or adjustment in its Interest or
any decrease or adjustment in the Interest of any other Member, subject to the
effect of Section 3.7 for the failure to make such Capital Contribution; and
(ii) following the Initial Gryphon Contribution, the Members shall make Capital
Contributions pro rata in proportion to their respective Interests. Prior
to the Effective Date, Waterton Global Value, L.P. advanced a loan of $3,000,000
to Gryphon for use by the Company and the conduct of the Company’s business and
operations, which loan was advanced to Gryphon under and pursuant to the Credit
Agreement. As of the Effective Date, such $3,000,000 loan from Waterton Global
Value, L.P. to Gryphon shall be treated as, and shall be deemed to be: (x) a
$3,000,000 Capital Contribution to the Company that shall be applied to the
satisfaction of the Initial Gryphon Contribution; and (y) a Default Loan made by
Waterton to Gryphon for purposes of this Agreement (and a corresponding Capital
Contribution to the Company), with a Default Amount as of the Effective Date of
$3,000,000. As of the Effective Date, Gryphon will be treated as a Delinquent
Member and Waterton will be treated as a Non-Defaulting Member, and Section 3.7
shall apply to this Default Loan. For purposes of this Agreement, the Effective
Date shall be deemed to be the date on which such Default Amount was due as a
Capital Contribution to the Company.

13

     (c) With respect to an adopted
Program and Budget then in effect, the Board of Managers shall submit to each
Member from time to time an invoice for estimated cash requirements for the
Company for the period of time referenced therein. With respect to a Capital
Contribution specified in a Program and Budget, each Member shall, within three
(3) Business Days after receipt of such an invoice, pay to the Company as an
additional Capital Contribution its proportionate share of the estimated amount
based on its Interest. With respect to a Capital Contribution authorized by the
Board of Managers, each Member shall, within three (3) Business Days following
such authorization, pay to the Company as an additional Capital Contribution its
proportionate share of such Capital Contribution based on its Interest. Time is
of the essence in the payment of any Capital Contribution pursuant to the
Program and Budget or as authorized and called by the Board of Managers. Subject
to receipt of such Capital Contributions or other funds under this Agreement,
the Board of Managers (a) shall maintain a minimum cash reserve of the amount
the Board of Managers estimates will be required to pay Company costs and
expenses that are or will become payable within thirty (30) days after the date
of determination, and (b) shall have the right to maintain an additional cash
reserve of up to the amount the Board of Managers estimates will be required to
pay Company costs and expenses that are or will become payable within an
additional three (3) months after the date of determination. All funds in excess
of the immediate cash requirements of the Company shall be invested in one or
more interest-bearing accounts maintained with a deposit taking financial
institution reasonably selected by the Board of Managers.

Section 3.7 Remedies For Failure to Meet Cash Calls.

     (a) If a Member (the
“Delinquent Member”) has not contributed all or any portion of any
additional Capital Contribution that such Member is or was required to
contribute under this Agreement (the “Default Amount”), then the other
Member (the “Non-Defaulting Member”) may elect to exercise its rights
under either Section 3.7(b), 3.7(c) or 3.7(d) by written notice to the
Delinquent Member within one (1) Business Day after the occurrence of the
default, but in each case subject to Section 3.7(c) . In the absence of delivery
of a written notice of election of rights, the Non-Defaulting Member shall be
deemed to have elected to exercise its rights under Section 3.7(b) . In the case
of an election under Section 3.7(b) or 3.7(c), the Non-Defaulting Member shall
pay the entire Default Amount to the Company on behalf of the Delinquent Member
within such one (1) Business Day period.

     (b) If the Non-Defaulting Member
makes an election under this Section 3.7(b), the payment by the Non-Defaulting
Member of the Default Amount shall be treated as a loan (a “Default
Loan”) from the Non-Defaulting Member to the Delinquent Member, and a
Capital Contribution of that amount to the Company by the Delinquent Member,
with the following results:

14

 

     (i) the
amount of the Default Loan shall bear interest at the Default Rate from the date
that the Non-Defaulting Member makes the Default Loan until the date that the
Default Loan, together with all accrued and unpaid interest, is repaid by the
Delinquent Member to the Non-Defaulting Member or from Distributions as provided
in Section 3.7(b)(ii) (with all payments or distributions being applied first to
accrued and unpaid interest and then to principal);

     (ii) all
Distributions (or sales of minerals by the Company and Distributions of the
proceeds of such sales) that otherwise would be made to the Delinquent Member
after the date of the default (whether before or after the dissolution of the
Company) instead shall be made to the Non-Defaulting Member until the Default
Loan and all accrued and unpaid interest have been paid in full to the
Non-Defaulting Member;

     (iii) the
principal balance of the Default Loan and all accrued and unpaid interest shall
be due and payable in whole immediately upon the date that is six (6) months
following the date on which the Default Amount was due, without the delivery of
any notice or demand by the Non-Defaulting Member; provided, that the
Non-Defaulting Member may, in its sole discretion, choose to extend such due
date by the delivery of written notice of extension to the Delinquent
Member;

     (iv)
after any default in the payment of the principal of or interest on the Default
Loan, the Non-Defaulting Member may (A) again make an election by notice to the
Delinquent Member to convert the unpaid balance of the Default Loan and all
accrued and unpaid interest to a Capital Contribution by the Non-Defaulting
Member, in which case the provisions of Section 3.7(c) shall apply, with the
unpaid balance and all interest accrued thereon treated as the Default Amount
for purposes of the calculations under Section 3.7(c), or (B) exercise any other
rights and remedies granted to the Non-Defaulting Member or the Company under
this Agreement or available at law or in equity as the Non-Defaulting Member may
deem appropriate in its sole discretion to obtain payment by the Delinquent
Member of the Default Loan, including the rights of a secured party under the
Uniform Commercial Code with respect to the security interest granted under
Section 3.8, all at the cost and expense of the Delinquent Member; 

     (v) in
the event that Gryphon is the Delinquent Member, and, after Gryphon becomes a
Delinquent Member either (A) any “person” or “persons acting jointly or in
concert” as defined under applicable securities laws or regulations becomes the
record or beneficial owner of more than fifty percent (50%) of then outstanding
voting equity interests of Gryphon (measured by voting power rather than the
number of shares), or (B) following the Effective Date, Continuing Directors of
Gryphon shall not constitute at least a majority of the board of directors of
Gryphon, then any Default Loan shall automatically and immediately become due
and payable, notwithstanding the existence of any Cure Period, and Gryphon shall
immediately repay such Default Loan in an amount equal to the Default Loan plus
interest at the Default Rate for a deemed period of time through and including
the last day of the applicable Cure Period, regardless of the actual number of
days elapsed; for purposes of this clause (v), “Continuing Directors” shall
mean, at any date, an individual (a) who is a Director of Gryphon as of the
Effective Date, or (b) who has been nominated to be a Director by the Directors
of Gryphon that were Directors as of the Effective Date; and

   

15

  (vi)
during the period that any such Default Loan is in default, all rights of the
Delinquent Member or any Board Manager designated by the Delinquent Member to
vote, veto or consent to any matter under this
Agreement shall be suspended, and the Interest of the Delinquent Member and its
Board Managers shall be deemed not outstanding for purposes of determining
whether a quorum exists at any meeting of the Board of Managers or whether any
specified percentage of votes required to adopt, consent to or approve any
matter has been obtained.

     (c) If the Non-Defaulting Member
makes an election under this Section 3.7(c) or under Section 3.7(b), the payment
by the Non-Defaulting Member of the Default Amount plus accrued interest
at the Default Rate shall be treated as a Capital Contribution by the
Non-Defaulting Member to the Company on behalf of the Delinquent Member. In
either case, the Interests of the Members shall be adjusted as follows: (i) the
Interest of the Delinquent Member shall be reduced by an amount (expressed as a
percentage) equal to: (A) the Default Amount plus accrued interest at the
Default Rate for the actual number of days elapsed since the date of default,
divided by the total amount of the called Capital Contribution as set
forth in the applicable Call Notice; multiplied by (B) twenty-five
percent (25%); and (ii) the Interest of the Non-Defaulting Member shall be
increased on a pro rata basis by an amount (expressed as a percentage)
equal to the foregoing reduction in the Interest of the Delinquent Member.
Whether the Non-Defaulting Member makes an election under this Section 3.7(c) or
under Section 3.7(b), the foregoing adjustments shall be automatically effective
as of the date that is six (6) months following the date when any Default Amount
was due (as set forth in the applicable Call Notice), unless the Delinquent
Member cures its failure to make its Capital Contribution in accordance with
Section 3.7(d) prior to the expiration of such six (6) month period (the
“Cure Period”).

     (d) During the Cure Period, a
Delinquent Member may repay to the Non-Defaulting Member an amount equal to the
Default Amount plus accrued interest at the Default Rate in order to
maintain its Interest in the amount in existence prior to its failure to fund
such Capital Contribution and the application of remedies under Sections 3.7(b)
through (d). Following the expiration of the Cure Period, the Board of Managers
shall adjust the Interests and amend Schedule 3.1 to reflect the adjustment of
Interests, and if appropriate, issue new Units and/or redeem existing Units
and/or transfer Units to reflect such adjusted Interests, to the extent
necessary to reflect any changes in Interests resulting from the operation of
this Section 3.7. If the Non-Defaulting Member makes an election under Sections
3.7(b) through (d), then the applicable provisions of this Section 3.7 shall be
the sole and exclusive remedies available to the Non-Defaulting Member for the
default. If the Non-Defaulting Member does not make such an election (and if
applicable, the required advance), then the Non-Defaulting Member shall have, on
its own behalf and on behalf of the Company, all of the rights and remedies
available at law or in equity as the Non-Defaulting Member may deem appropriate
in its sole discretion to obtain payment and collection of the Default Amount,
including the prosecution of a suit against a Delinquent Member and all of the
rights and remedies of a secured party under the Uniform Commercial Code with
respect to the security interest granted under Section 3.8, all at the cost and
expense of the Delinquent Member. IN THE CASE OF AN ELECTION UNDER SECTION
3.7(b) or 3.7(c), THE MEMBERS AGREE THAT THE LIQUIDATED DAMAGES DESCRIBED IN
THIS SECTION 3.7 ARE A FAIR AND ADEQUATE MEASURE OF THE DAMAGES THAT WILL BE
SUFFERED BY THE NON-DEFAULTING MEMBER AS A RESULT OF A BREACH BY A MEMBER OF ITS
OBLIGATION TO MAKE CAPITAL CONTRIBUTIONS FOR CASH CALLS UNDER THIS AGREEMENT AND
ARE NOT, AND SHALL NOT BE DEEMED TO BE, A PENALTY.

     (e) At any time that a Default
Amount remains outstanding and uncured, notwithstanding the fact that a
Delinquent Member has the right to cure its failure to contribute as set forth
in Section 3.7(d), any Distribution made by the Company to its Members
(including any Distribution described in Section 5.1) and any payment made to
the Members pursuant to Section 12.2(e), shall be made on a pro forma
basis as if the Interests have been adjusted to account for the operation of
Section 3.7(b) and (c), and the Delinquent Member shall be treated as if its
Interest had been reduced.

16

     Section 3.8 Security
Interest. 

     Each Member hereby irrevocably
and unconditionally grants to the other a pledge of, security interest in and
charge over its Interest, and any accessions thereto and any proceeds and
products therefrom, to secure the payment obligations of the granting Member
hereunder, including such Member’s obligations to make Capital Contributions and
to repay Default Loans. Each Member hereby authorizes the other to file and
record all financing statements, continuation statements and other instruments
necessary or desirable to perfect or effectuate the provisions of this Section
3.8. In connection with any foreclosure, transfer in lieu, or other enforcement
of rights in the security interest granted in this Section 3.8, notwithstanding
any contrary provision in Article 11, the acquiring Person shall, at the
election of the remaining Member, automatically be admitted as a Member in the
Company without any further action of the defaulting Member. In such case, the
defaulting Member shall take all action that the non-defaulting Member may
reasonably request to effectuate the admission of the transferee as a Member.
The Delinquent Member grants to the Non-Defaulting Member a power of sale as to
its entire Interest subject to the security interest created under Section 3.7
(whether or not perfected), upon a default in making required Capital
Contributions or in repaying a Default Loan upon expiry of the Cure Period;
provided, that any such foreclosure and recovery shall be with respect to
the amount then owing to the Non-Defaulting Member; provided, further
that in no event shall the Non-Defaulting Member acquire an interest from
the Delinquent Member upon exercise of its power of sale or enforcement of its
pledge, security interest or charge, which would result in the Non-Defaulting
Member owning an Interest greater than it would have had if it had made an
election under Section 3.7(c) or Section 3.7(b) or the Delinquent Member owning
an Interest that is less than it would have had if the Non-Defaulting Member
made an election under Section 3.7(c) or Section 3.7(b) . Such power shall be
exercised in the manner provided by applicable Law or otherwise in a
commercially reasonable manner and upon reasonable written notice. In connection
with any exercise of this power of sale, the Delinquent Member hereby waives any
available right of redemption or required valuation or appraisal of the Interest
prior to sale, any available right to stay execution or to require a marshalling
of assets, and any required bond if a receiver is appointed, and the Delinquent
Member shall be liable for any deficiency.

      Section 3.9 Call Notice.

     (a) Each Member agrees that it
shall make and contribute any Capital Contribution required by a written notice
(a “Call Notice”) authorized and issued by the Board of Managers;
provided that only the Board of Managers shall be authorized to issue a
Call Notice. Each Member’s Capital Contribution shall equal the product of (a)
the aggregate amount of Capital Contributions authorized by the Board of
Managers, multiplied by (b) such Member’s Interest.

     (b) Each Call Notice issued by
the Board of Managers to the Members shall set forth: (i) the name of the
Company; (ii) the date by which such Capital Contributions are due and payable,
which shall be three (3) Business Days after the date such Call Notice is sent
to the Members; (iii) the total amount of the Capital Contribution that has been
authorized; (iv) the Capital Contribution to be made by the Member to which the
Call Notice is addressed; (v) the Company account to which such Capital
Contribution is to be paid, including wire transfer instructions; (vi) a
description of the use of funds for which the Company will use such Capital
Contribution, by reference to the Program and Budget; and (vii) such other
information as deemed appropriate by the Board of Managers.

     Section 3.10
Certification. 

     Units shall be issued in
certificated form. Each Unit shall constitute a “security” within the meaning of
and shall be governed by (i) Article 8 of the Uniform Commercial Code (including
Section 104.8102(1)(n) thereof) as in effect from time to time in the State of
Nevada, and (ii) the Uniform Commercial Code of any other applicable
jurisdiction that now or hereafter substantially includes the 1994 revisions to
Article 8 thereof as adopted by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws and approved by the American
Bar Association on February 14, 1995. In the event that
certificates representing the Units or other interests in the Company are
issued, such certificates will bear the following legend:

17

	
      “THE UNITS OR OTHER INTERESTS REPRESENTED BY THIS
      CERTIFICATE WERE ORIGINALLY ISSUED ON JANUARY 30, 2013, HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
      APPLICABLE STATE SECURITIES LAWS (“STATE ACTS”) AND MAY NOT BE SOLD OR
      TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
      THE ACT OR STATE ACTS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
      TRANSFER OF THE UNITS REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
      CONDITIONS SPECIFIED IN THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY
      AGREEMENT, DATED AS OF JANUARY 30, 2013, AS IT MAY BE AMENDED FROM TIME TO
      TIME, GOVERNING THE ISSUER (THE “COMPANY”) AND BY AND AMONG CERTAIN
      MEMBERS. A COPY OF SUCH AGREEMENT WILL BE FURNISHED BY THE COMPANY TO THE
      HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE. 

	
            

	
      THIS CERTIFICATE EVIDENCES A UNIT OR OTHER INTEREST
      REPRESENTING AN INTEREST IN THE COMPANY AND SHALL CONSTITUTE A “SECURITY”
      WITHIN THE MEANING OF AND SHALL BE GOVERNED BY (I) ARTICLE 8 OF THE
      UNIFORM COMMERCIAL CODE (INCLUDING SECTION 104.8102(1)(n) THEREOF) AS IN
      EFFECT FROM TIME TO TIME IN THE STATE OF NEVADA, AND (II) THE UNIFORM
      COMMERCIAL CODE OF ANY OTHER APPLICABLE JURISDICTION THAT NOW OR HEREAFTER
      SUBSTANTIALLY INCLUDES THE 1994 REVISIONS TO ARTICLE 8 THEREOF AS ADOPTED
      BY THE AMERICAN LAW INSTITUTE AND THE NATIONAL CONFERENCE OF COMMISSIONERS
      ON UNIFORM STATE LAWS AND APPROVED BY THE AMERICAN BAR ASSOCIATION ON
      FEBRUARY 14, 1995.” 

     Section 3.11 Deemed Resignation; Elimination of Minority
Interest.

     (a) A Member shall be deemed to
have resigned from the Company as a Member under section 18-306(2) of the Act
upon the dilution or reduction of such Member’s Interest to ten percent (10%) or
less, effective immediately upon the date of such dilution or reduction (the
“Resignation Effective Date”). Upon such deemed resignation, the
resigning Member shall relinquish to the Company its entire Interest, free and
clear of liens, encumbrances or contractual obligations, in exchange for the
right to receive from the Company a three and one-half percent (3.5%) Net Profit
Interest. Other than the grant of the 3.5% Net Profit Interest to the resigning
Member described in this Section, and the rights and obligations of a Member
that survive the resignation or deemed resignation of a Member, the resignation
of a Member and the associated relinquishment by a Member of its Interest under
this Section 3.11 shall be for no consideration whatsoever, and such resigning
Member hereby expressly waives, and agrees not to make or assert, any claim for
additional consideration or a claim of inadequate consideration; and such
resigning Member shall (from the Resignation Effective Date) no longer be
treated as an owner of or partner in the Company for federal income tax
purposes. The Net Profit Interest, if any, shall be calculated by the Company
and shall be paid by the Company in the ordinary course of business. In the
event of a sale of all or substantially all of the assets of the Company,
including the Properties, at any time that a Net Profit Interest has been
issued, the Members intend that the Net Profit Interest shall be binding on any
Person to whom the Company sells all or substantially all of the assets of the
Company (including the Properties), and the Members will take all commercially
reasonable actions necessary to have such acquiror assume the obligation of the
Company in respect of such Net Profit Interest where such net profit interest will be calculated by reference to the net profits
from the production of minerals from the Properties.

18

     (b) Upon the resignation or
deemed resignation of a Member, or the relinquishment of a Member’s Interest,
the Member shall execute and deliver such instruments of assignment, transfer
and conveyance, conveying its Interest to the Company (or to a designee of the
Company designated by the other Member, which may include the other Member or
its Affiliates) as the Company or the other Member reasonably requests. If such
Person fails or refuses to execute or deliver such documents or instruments of
assignment, transfer or conveyance, Waterton or its Permitted Transferees or the
Board of Managers, as the case may be, may withhold any amounts due with respect
to the Net Profit Interest until the documents or instruments of transfer are
executed and become effective or execute and deliver such necessary documents or
instruments pursuant to the power of attorney as provided in Section 20.5.
Regardless of when the actual relinquishment and transfer takes place, such
Person will cease to have any interest in the profits or losses of, or
distributions by, the Company occurring after the Resignation Effective Date.
Following the Resignation Effective Date, the Board of Managers shall adjust the
Interests and amend Schedule 3.1 to reflect the adjustment of Interests created
by the resignation or deemed resignation, to the extent necessary to reflect any
changes in Interests resulting from the operation of this Section 3.11.

ARTICLE 4 
CAPITAL ACCOUNTS

     Section 4.1 Capital
Accounts. 

     A separate account (each, a
“Capital Account”) will be established and maintained for each Member
which:

     (a) will be increased by (i) the
amount of any Capital Contribution by such Member to the Company and (ii) such
Member’s share of the Net Profit (and other items of income or gain) of the
Company, and

     (b) will be reduced by (i) the
amount of any Distribution to such Member and (ii) such Member’s share of the
Net Loss (any other items of loss and deduction) of the Company.

     It is the intention of the
Members that the Capital Accounts of the Company be maintained in accordance
with the provisions of Section 704(b) of the Code and the Regulations thereunder
and that this Agreement be interpreted consistently therewith. The Members’
Capital Accounts as of the Effective Date are shown on the Schedule of Members
attached as Schedule 3.1. 

     Section 4.2 Revaluations of
Assets and Capital Account Adjustments. 

     Unless otherwise determined by
the Board of Managers, immediately preceding the issuance of additional Units in
exchange for cash, other property, or services to a new or existing Member or
upon the redemption of the Interest of a Member or the liquidation of the
Company, the then prevailing Asset Values of the Company will be adjusted to
equal their respective gross Fair Market Value and any increase in the net
equity value of the Company (Asset Values less Liabilities) will be credited to
the Capital Accounts of the Members in the same manner as Net Profits are
credited under Section 5.5(b) (or any decrease in the net equity value of the
Company will be charged in the same manner as Net Losses are charged under
Section 5.5(b)) . Accordingly, as of any time Asset Values are adjusted pursuant
to this Section 4.2, the Capital Accounts of Members will reflect both realized
and unrealized gains and losses through such date and the net equity value of
the Company as of such date.

19

     Section 4.3 Additional Capital
Account Adjustments. 

     Items of income, gain, loss and
deduction of the Company for each Fiscal Year or relevant part thereof that are
reflected in the Capital Accounts shall be determined in accordance with the
principles of paragraph (i) through (v) of Section 5.5.

     Section 4.4 Additional Capital
Account Provisions. 

     Except as otherwise agreed to in
writing by the Company and any Member, no Member will have the right to demand a
return of all or any part of such Member’s Capital Contributions. Any return of
the Capital Contributions of any Member will be made solely from the assets of
the Company and only in accordance with the terms of this Agreement. No interest
will be paid to any Member with respect to such Member’s Capital Contributions
or Capital Account. In the event that all or a portion of the Units of a Member
are Transferred in accordance with this Agreement, the Transferee of such Units
will also succeed to all or the relevant portion of the Capital Account of the
Transferor (based on the ratio of the number of Units held by the Transferor
immediately before the Transfer to the number of Units Transferred), and will be
treated as having made any Capital Contributions, and received any
Distributions, made or received with respect to such Transferred Units while
such Units were held by the Transferor. Units held by a Member may not be
Transferred independently of the Interest to which the Units relates.

ARTICLE 5
DISTRIBUTIONS AND ALLOCATIONS OF PROFIT
AND LOSS 

     Section 5.1
Distributions.

     (a) Tax Distributions.
Subject to the terms and conditions hereof and provided that no such
Distribution would render the Company insolvent, the Board of Managers shall
(subject to any required lender consents if the Company or any of its
Subsidiaries is then in default under any credit agreement to which any of them
is a party) cause the Company to make, as and when determined by the Board of
Managers, but no less often than on an annual basis, a distribution (only to the
extent of available cash at the Company and subject to such terms and conditions
as the Board of Managers may impose) to each Member pro rata in accordance with
that Member’s percentage ownership of Units calculated to ensure that the
aggregate amount of all distributions paid by the Company in all years to the
Member with the highest estimated actual tax liability with respect to
cumulative net taxable income allocations from the Company, but excluding gain
from the sale of all or substantially all assets of the Company is equal to such
estimated actual tax liability (which is deemed to be the highest marginal
combined tax rate for an individual resident of New York, New York), determined
by the Board of Managers as if allocations from the Company were, for any
taxable year, the sole source of income and loss for such Member (“Tax
Distribution”); provided, that if such Tax Distribution would result
in a default or event of default under any credit agreement of the Company or
any of its Subsidiaries, no Tax Distribution shall be made unless the Board of
Managers approves such pro rata Tax Distribution, provided, that, if such
pro rata Tax Distribution is not approved by the Board of Managers, a lower or
disproportionate Tax Distribution that does not result in a default or event of
default under any credit agreement of the Company or any of its Affiliates may
be made if approved by the Board of Managers; provided, further,
that if a disproportionate Tax Distribution is paid to Gryphon, such payment
shall be in the form of limited recourse (to their Interests and any proceeds
thereof) advances, to be repaid or recovered at a future date or on exit,
whichever occurs first. To the extent the provisions of this Section 5.1(a)
cannot be fully implemented, the Board of Managers may make such alternative
arrangements as are necessary to ensure that each Member receives the economic
benefit of the Tax Distributions contemplated under this Section 5.1(a) . All
Members shall use their reasonable commercial efforts to persuade any lender to
agree to permit (if such lender’s consent is required) pro rata Tax
Distributions.

20

     (b) Distribution of Net Cash
Flow. Subject to (i) Section 5.1(a) and 5.1(d), (ii) any applicable
agreement to which the Company or any of its Subsidiaries is a party governing
the terms of indebtedness for borrowed money and to the retention and
establishment of reserves, or (iii) payment to third parties of such funds as
the Board of Managers deems necessary in its sole discretion with respect to the
reasonable business needs and obligations of the Company, the net cash flow of
the Company may be distributed to the Members at such times and in such amounts
as may be determined by the Board of Managers from time to time; provided
that, subject to the foregoing, the Board of Managers shall endeavour to
Distribute on a monthly basis all net cash flow in excess of a reserve of
$2,400,000, unless the Board of Managers affirmatively decides that (x)
additional reserves are necessary to operate the business of the Company in the
ordinary course of business, (y) such a Distribution would be inconsistent with
the then-current Program and Budget, or (z) such a Distribution would not be in
the best interest of the Company. Except as specifically set forth in this
Article 5 and Section 3.7(e), all Distributions will be made and distributed to
the Members as follows: first (i) the Company shall make Distributions to the
Members ratably based on the Capital Contributions made prior to the date of
such Distribution in accordance with the percentage of such Capital
Contributions made by each Member, then (ii) following the foregoing
Distribution and payment to the Members, any remaining net cash flow available
for Distribution, as determined by the Board of Managers, shall be distributed
and paid ratably to the Members on a pro rata basis in accordance with
each Member’s Interest.

     (c) Erroneous Distributions.
If the Company has, pursuant to any clear and manifest accounting or similar
error, paid any Member an amount in excess of the amount to which it is entitled
pursuant to this Article 5, such Member will reimburse the Company to the extent
of such excess, without interest, within thirty (30) days after demand by the
Company.

     (d) Asset Sale
Distributions. Notwithstanding any other provision of this Section 5.1
(other than the provision of Section 5.1(a) related to limited recourse
advances), in the event that the Company or any of its Subsidiaries sells all or
a substantial part of the assets of the Company (an “Asset Sale”), the
net proceeds of such Asset Sale shall be distributed as follows: (A) first, the
Company shall distribute to Waterton, and Waterton will receive, an amount equal
to the value of Waterton’s initial Capital Contribution, which is an amount
equal to $17,000,000, (B) second, the Company shall distribute to each Member an
amount equal to the aggregate amount of all Capital Contributions actually made
by such Member following such Member’s initial Capital Contribution on a pro
rata basis in accordance with the Capital Contributions made by such Member,
up to the aggregate amount of such Capital Contributions, then (C) following the
foregoing Distributions and payments, the remaining net proceeds of such Asset
Sale (if any) shall be distributed among the Members pro rata in
accordance with each Member’s Interest (after taking into account any pro
forma adjustments based on Section 3.7(e)) .

     Section 5.2 No Violation.

     Notwithstanding any provision to
the contrary contained in this Agreement, the Company will not make a
Distribution to any Member on account of such Member’s Interest in the Company
if such Distribution would violate Section 18-607 of the Act or other applicable
Law.

     Section 5.3 Withholding; Tax
Indemnity. 

     All amounts withheld pursuant to
the Code or any federal, state, local or non-U.S. tax Law with respect to any
payment, distribution or allocation to a Member, or which the Company is
otherwise obligated to pay to any governmental agency because of the status of a
Member of the Company (including any interest, penalties and expenses associated
with such payments), will be treated as amounts paid to such Member for all
purposes of this Agreement. The Board of Managers is authorized to withhold from
Distributions to Members, or with respect to allocations to Members, and in each
case to pay over to the appropriate federal, state, local or non-U.S. government
any amounts required to be so withheld. The Board of Managers will allocate any
such amounts to the Members in respect of whose Distribution or allocation the
tax was withheld and will treat such amounts as actually distributed to such Members. Each
Member further agrees to indemnify the Company in full for any amounts required
to be withheld and paid pursuant to this Section 5.3, provided that such amounts
are paid over to the applicable taxing authority for the account of such Member,
and only to the extent such amounts were not withheld from Distributions to that
Member (including, without limitation, any interest, penalties and expenses
associated with such payments to the extent that such interest, penalties and
expenses result from actions or omissions of the Member rather than of the
Company), and each Member will promptly upon notification of an obligation to
indemnify the Company pursuant to this Section 5.3 make a cash payment to the
Company equal to the full amount to be indemnified (and the amount paid will be
added to such Member’s Capital Account but will not be treated as a Capital
Contribution) with interest to accrue on any portion of such cash payment not
paid in full when requested, calculated at a rate equal to 10% per annum,
compounded as of the last day of each year (but not in excess of the highest
rate per annum permitted by Law).

21

     Section 5.4 Property
Distributions and Installment Sales. 

     If any assets of the Company will
be distributed in kind pursuant to this Article 5, such assets will be
distributed to the Members entitled thereto in the same proportions as the
Members would have been entitled to cash Distributions. The amount by which the
Fair Market Value of any property to be distributed in kind to the Members
exceeds or is less than the then prevailing Asset Value of such property will,
to the extent not otherwise recognized by the Company, be taken into account in
determining Net Profit and Net Loss and determining the Capital Accounts of the
Members as if such property had been sold at its Fair Market Value immediately
prior to such Distribution.

     Section 5.5 Net Profit or
Net Loss.

     (a) The “Net Profit” or “Net
Loss” of the Company for each Fiscal Year or relevant part thereof means an
amount equal to the Company’s taxable income or loss for U.S. federal income tax
purposes for such period (including all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code) with
the following adjustments:

     (i) Any
income of the Company that is exempt from U.S. federal income tax will
constitute Net Profits, and any expenses or expenditures of the Company which
may neither be deducted nor capitalized for tax purposes (or are so treated for
tax purposes) will constitute Net Losses.

     (ii) Gain
or loss attributable to the disposition of property of the Company with an Asset
Value different than the adjusted basis of such property for U.S. federal income
tax purposes will be computed with respect to the Asset Value of such
property.

     (iii)
Depreciation, amortization or cost recovery deductions (other than depletion)
with respect to any property with an Asset Value that differs from its adjusted
basis for U.S. federal income tax purposes will mean “book depreciation,
depletion or amortization” as determined under Section 1.704 -1(b)(2)(iv)(g)(3)
or Section 1.704 -3(d)(2) of the Treasury Regulations (as applicable); and
provided, further that if any property has a zero adjusted basis for
federal income tax purposes, depreciation, amortization or cost recovery
deductions with respect to such property may be determined under any reasonable
method selected by the Company on the advice of its accountants..

     (iv)
Depletion with respect to a mineral property will equal the allowable tax
depletion on that property for such year multiplied by the ratio of the Asset
Value of such property to the adjusted tax basis of that property prior to
depletion for such year; provided however that such percentage shall not be in
excess of 100% of such Asset Value.

22

     (v) If
the Company makes an election under Section 754 of the Code to provide a special
basis adjustment upon the transfer of an Interest in the Company or the
distribution of property by the Company, Capital Accounts will be adjusted to
the limited extent required by the Regulations under Section 704 of the Code
following such transfer or distribution.

     (vi) Any
items that are required to be specially allocated pursuant to Section 5.6 will
not be taken into account in determining Net Profit or Net Loss.

     (b) Allocations of Net Profit and
Net Loss. The Net Profit and Net Loss of the Company for any relevant fiscal
period or, to the extent necessary to accomplish the purpose of this Section
5.5(b), gross items of income, gain, deduction, and loss constituting such Net
Profit and Net Loss, will be allocated to the Capital Accounts of the Members so
as to ensure, to the extent possible, that the Target Capital Accounts are equal
to the aggregate Distributions that Members would be entitled to receive
(assuming all Units are vested) if all of the assets of the Company were sold
for their Asset Values (assuming for this purpose only that the Asset Value of
an asset that secures a non-recourse liability for purposes of Section 1.1001 -2
of the Regulations is no less than the amount of such liability that is
allocated to such asset in accordance with Section 1.704 -2(d)(2) of the
Regulations), all liabilities of the Company were repaid from the proceeds of
sale and the net remaining proceeds were distributed as of the end of such
accounting period in accordance with Section 5.1(a), Section 5.1(d) and (to the
extent applicable) Section 3.11(a) .

     The allocations made pursuant to
this Section 5.5 are intended to comply with the provisions of Section 704(b) of
the Code and the Regulations thereunder and, in particular, to reflect the
Members’ economic interests in the Company as set forth in Section 5.1, and this
Section 5.5 will be interpreted in a manner consistent with such intention.

     Section 5.6 Regulatory
Allocations. 

     Although the Members do not
anticipate that events will arise that will require application of this Section
5.6, provisions governing the allocation of taxable income, gain, loss,
deduction and credit (and items thereof) are included in this Agreement as may
be necessary to provide that the Company’s allocation provisions contain a
so-called “Qualified Income Offset” and comply with all provisions relating to
the allocation of so-called “Nonrecourse Deductions” and “Member Nonrecourse
Deductions” and the chargeback thereof as set forth in the Regulations under
Section 704(b) of the Code. In the event any Member has a deficit Target Capital
Account at the end of any Fiscal Year, such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible. The Members intend that the allocations required by the two preceding
sentences (the “Regulatory Allocations”) will be offset by other
Regulatory Allocations or special allocations of tax items so that each Member’s
share of the Net Profit, Net Loss and capital of the Company will be the same as
it would have been had the events requiring the Regulatory Allocations not
occurred. For this purpose the Board of Managers, based on the advice of the
Company’s auditors or tax counsel, shall make such special curative allocations
of tax items as may be necessary to minimize or eliminate any economic
distortions that may result from any required Regulatory Allocations.

     Section 5.7 Tax
Allocations.

     (a) General. Except as set
forth in this Section 5.7, or otherwise required by Law, all items of income,
deduction, loss and credit will be allocated for federal, state and local income
tax purposes in the same manner that such items are allocated for purposes of
maintaining Capital Accounts.

     (b) Contributed Assets. In
accordance with Section 704(c) of the Code, income, gain, loss and deduction
with respect to any property contributed to the Company with an adjusted basis
for U.S. federal income tax purposes different from the initial Asset Value at
which such property was accepted by the Company will, solely for tax purposes, be allocated among
the Members so as to take into account such difference in the manner required by
Section 704(c) of the Code and the applicable Regulations.

23

     (c) Revalued Assets. If
the Asset Values of any assets of the Company are adjusted pursuant to Section
4.2, subsequent allocations of income, gain, loss and deduction with respect to
such assets will, solely for tax purposes, be allocated among the Members so as
to take into account such adjustment in the same manner as under Section 704(c)
of the Code and the applicable Regulations.

     (d) Elections and
Limitations. The allocations required by this Section 5.7 are solely for
purposes of federal, state and local income taxes and will not affect the
allocation of Net Profits or Net Losses as between Members or any Member’s
Capital Account. All tax allocations required by this Section 5.7 will be made
using any method permitted by Regulation 1.704 -3 as determined by the Board of
Managers, with the advice of the Company’s auditors or tax counsel.
Notwithstanding the foregoing, the Board of Managers (i) shall use the remedial
method under Section 1.704 -3(d) of the Regulations for purposes of allocating
income, gain, loss or deduction with respect to any property contributed or
deemed to have been contributed to the Company on or prior to the initial
effective date of this Agreement; and (ii) shall not use any method of
allocating income, gain, loss or deduction under Section 704(c) of the Code or
the Regulations thereunder with respect to any contributions of cash or property
to the Company after the initial effective date of this Agreement if such method
would have a material disproportionate negative impact on any Person who is a
Member as of such initial effective date, unless such Person, acting reasonably,
approves the use of such method.

     (e) Excess Depletion.
Excess percentage depletion deductions with respect to depletable property shall
be allocated to the Members in accordance with the allocation of gross income
from the property from which such deductions are derived. The term “excess
percentage depletion” shall mean the excess, if any, of deductions for
percentage depletion as determined for tax purposes over the adjusted basis of
the depletable property.

     Section 5.8 Changes in
Members’ Interests. 

     If during any year there is a
change in any Member’s interest in the Company, the Board of Managers will
confer with the tax advisors to the Company and, in conformity with such advice
allocate the Net Profit or Net Loss to the Members so as to take into account
the varying interests of the Members in the Company in a manner that complies
with the provisions of Section 706 of the Code and the Treasury Regulations
thereunder; provided that, in the event of a transfer of Units during a Fiscal
Year in accordance with the provisions of this Agreement, the Company shall make
allocations between the transferor and transferee based upon the interim closing
of the books method to the extent that such method is consistent with Section
706 of the Code (or, at the election of the applicable transferor and transferee
and with the consent of the Board, which shall not be unreasonably withheld,
utilize any other method permitted under Section 706 of the Code) for purposes
of determining the allocations and distributions required under this
Agreement.

ARTICLE 6
STATUS, RIGHTS AND POWERS OF UNIT
HOLDERS

     Section 6.1 Limited
Liability. 

     Except as otherwise provided by
the Act, the debts, expenses, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, will be solely the debts,
expenses, obligations and liabilities of the Company, and no Member or
Indemnified Person will be obligated personally for any such debt, expense,
obligation or liability of the Company solely by reason of being a Member or
Indemnified Person. All Persons dealing with the Company will have recourse
solely to the assets of the Company for the payment of the debts, expenses,
obligations or liabilities of the Company. In no event will any Member be
required to make up any deficit balance in such Member’s Capital Account upon
the liquidation of such Member’s Interest or otherwise.

24

     Section 6.2 Return of
Distributions of Capital. 

     Except as expressly set forth in
this Agreement or as otherwise expressly required by Law, a Member, in such
capacity, will have no liability for obligations or liabilities of the Company
in excess of (a) the amount of such Member’s Capital Contributions, (b) such
Member’s share of any assets and undistributed profits of the Company and (c) to
the extent required by Law, the amount of any Distributions wrongfully
distributed to such Member. Except as expressly set forth in this Agreement or
as otherwise required by Law, no Member will be obligated by this Agreement to
return any Distribution to the Company or pay the amount of any Distribution for
the account of the Company or to any creditor of the Company; provided,
however, that if any court of competent jurisdiction holds that,
notwithstanding this Agreement, any Member is obligated to return or pay any
part of any Distribution, such obligation will bind such Member alone and not
any other Member or any Board Manager and provided, further, that if any Member
is required to return all or any portion of any Distribution under circumstances
that are not unique to such Member but that would have been applicable to all
Members if such Members had been named in the lawsuit against the Member in
question (such as where a Distribution was made to all Members and rendered the
Company insolvent, but only one Member was sued for the return of such
Distribution), the Member that was required to return or repay the Distribution
(or any portion thereof) will be entitled to reimbursement from the other
Members that were not required to return the Distributions made to them based on
each such Member’s share of the Distribution in question. The provisions of the
immediately preceding sentence are solely for the benefit of the Members and
will not be construed as benefiting any third party. The amount of any
Distribution returned to the Company by a Member or paid by a Member for the
account of the Company or to a creditor of the Company will be added to the
account or accounts from which it was subtracted when it was distributed to such
Member.

     Section 6.3 No Management or
Control. 

     Except as expressly provided in
this Agreement, no Member will take part in or interfere in any manner with the
management of the business and affairs of the Company or have any right or
authority to act for or bind the Company notwithstanding Section 86.291 of the
Act.

ARTICLE 7
DESIGNATION, RIGHTS, AUTHORITIES, POWERS,
RESPONSIBILITIES AND DUTIES OF THE BOARD OF MANAGERS

     Section 7.1 Board of
Managers. 

     The business and Operations of
the Company and its Subsidiaries will be managed and conducted by the Board of
Managers, and the Persons constituting the Board of Managers will be the
“managers” of the Company and its Subsidiaries for all purposes under the Act,
provided that, except as otherwise provided herein, no single Board
Manager (or the Gryphon Board Managers together with no other Board Manager) may
bind the Company or its Subsidiaries, and the Board of Managers will have the
power to act only collectively in accordance with the provisions and in the
manner specified herein and in Schedule 7.1. The Board of Managers will
initially be the individuals set forth in Schedule 7.1. Thereafter, the
individuals constituting the Board of Managers will be determined in accordance
with the provisions of Schedule 7.1. Schedule 7.1 sets forth the procedures for
the conduct of the affairs of the Board of Managers and decisions of the Board
of Managers will be set forth in a resolution adopted in accordance with the
procedures set forth in Schedule 7.1. Such decisions will be decisions of the
Company’s “manager” or Subsidiaries’ “manager” for all purposes of the Act and
will be carried out by officers or agents of the Company or its Subsidiaries
designated by the Board of Managers in the resolution in question or in one or
more standing resolutions or with the power and authority to do so under Article
8. Subject to, and as limited by the provisions of this Agreement, the Board Managers and the officers of the Company, in the
performance of their duties as such, shall owe to the Company and the Members
duties of loyalty and due care of the type owed under applicable Law by
directors and officers of a business corporation incorporated under Chapter 78
of the Nevada Revised Statutes; provided that no Waterton Board Manager
will be required to comply with the doctrine of corporate opportunity or any
analogous doctrine. The provisions of this Agreement, to the extent that they
restrict or eliminate the duties (including fiduciary duties) and liabilities of
a Board Manager or an officer of the Company otherwise existing at law or in
equity or by operation of the preceding sentence, are agreed by the Members and
the Company to replace such duties and liabilities of such Board Manager or
officer.

25

     A decision of the Board of
Managers may be amended, modified, rescinded or repealed in the same manner in
which it was adopted or in accordance with the procedures set forth in Schedule
7.1 as then in effect; provided, however, that no such amendment,
modification or repeal will affect any Person who has been furnished a copy of
the original resolution, certified by a duly authorized officer of the Company
or its Subsidiaries, until such Person has been notified in writing of such
amendment, modification or repeal; and provided, further that no
such amendment, modification, rescission or repeal will invalidate actions
previously authorized by such original resolution with respect to any Person if
such original resolution has been relied upon by such Person.

     Section 7.2 Authority of Board
of Managers. 

     Except as otherwise expressly
provided in this Agreement, the Board of Managers will have the exclusive power
and authority to manage and conduct the business and affairs of the Company and
its Subsidiaries and to make all decisions with respect thereto. Except as
otherwise expressly provided in this Agreement, the Board of Managers or Persons
designated by the Board of Managers, including officers and agents appointed by
the Board of Managers, will be the only Persons authorized to enter into
obligations, make arrangements or execute documents which will be binding on the
Company or its Subsidiaries. To the fullest extent permitted by Nevada law, but
subject to any specific provisions hereof granting rights to Members, the Board
of Managers will have the power to perform any acts, statutory or otherwise,
with respect to the Company, its Subsidiaries, or this Agreement, which would
otherwise be possessed by the Members under Nevada law, and the Members will
have no power whatsoever with respect to the management of the business and
affairs of the Company or its Subsidiaries. As permitted by Sections 86.296(1),
86.296(2), 86.326(2), 86.326(2)(b), 86.491 and 86.491(3) of the Act, the power
and authority granted to the Board of Managers hereunder will include all those
necessary, convenient or incidental for the accomplishment of the purposes of
the Company and its Subsidiaries and the exercise of the powers of the Company
and its Subsidiaries set forth in Section 2.6 above and will include the power
to make all decisions with regard to the management, operations, activities,
Properties, assets, financing and capitalization of the Company and its
Subsidiaries, including the power and authority to undertake and make decisions
concerning: (a) making any decision to authorize and require a Capital
Contribution, (b) approval of the annual Program and Budget and any amendment
thereto, (c) issuing any new or additional class of Units, (d) authorizing and
making any Distribution, (e) commissioning any Feasibility Study or 43-101
Report, (f) hiring and terminating the employment or service, as applicable, of
employees, attorneys, accountants, brokers, investment bankers and other
advisors and consultants, and entering into employment agreements, equity
incentive agreements and other agreements with respect thereto, (g) opening bank
and other deposit accounts and operations thereunder, (h) borrowing money,
obtaining credit, issuing notes, debentures, securities, equity or other
interests of or in the Company or its Subsidiaries, securing the obligations
undertaken in connection therewith with mortgages, deeds of trust, pledges and
security interests, and granting guaranties with respect to any of the
foregoing, (i) entering into or agreeing to any Hedging Transaction or granting,
selling or issuing any Royalty, (j) mergers, consolidations, other business
combinations, reorganizations, restructurings, recapitalizations, joint
ventures, partnerships or other similar alliances and making investments in or
the acquisition of securities of any Person, (k) giving guarantees and
indemnities, (l) entering into contracts, agreements or other binding
obligations or arrangements, including with Members and their Affiliates,
whether in the ordinary course of business or otherwise, (m) mergers with or
acquisitions of other Persons, (n) acquisitions of property (fee, surface,
mineral or otherwise) or other assets, (o) voluntary bankruptcy proceedings,
liquidation, insolvency or dissolution, (p) the sale of all or any portion of
the assets of the Company or its Subsidiaries, (q) forming subsidiaries or joint
ventures, (r) compromising, arbitrating, mediating, adjusting, settling and
litigating claims, causes of action, litigation or regulatory action in favor of
or against the Company or its Subsidiaries, (s) ceasing production for any
period of time, (t) any declaration of Force Majeure with respect to the Company
or its Operations, (u) any determination of Fair Market Value, or (v) any other
matter, action or thing with respect to the Company and its operations, whether
similar or dissimilar to the foregoing, with the foregoing list being provided
for illustrative purposes and not for purposes of limitation. Except as
otherwise stated herein, any decision, action, approval, authorization, election
or determination made by the Board of Managers in furtherance of the terms
herein may be made by the Board of Managers in its sole discretion.

26

     Section 7.3 Reliance by Third
Parties. 

     Any Person dealing with the
Company or the Members may rely upon a certificate signed by a Board Manager as
to: (a) the identity of the Members, (b) the existence or non-existence of any
fact or facts which constitute a condition precedent to acts by the Company or
the Members or are in any other manner germane to the affairs of the Company,
(c) the Persons that are authorized to execute and deliver any instrument or
document of or on behalf of the Company or its Subsidiaries, (d) the
authorization of any action by or on behalf of the Company or its Subsidiaries
by the Board of Managers or any officer or agent acting on behalf of the Company
or its Subsidiaries or (e) any act or failure to act by the Company or its
Subsidiaries or as to any other matter whatsoever involving the Company or
Members.

     Section 7.4 Directors’ and
Officers’ Insurance. 

     The Company may after the date
hereof purchase directors’ and officers’ insurance to cover its Board Managers
and officers for so long as such policies are available at commercially
reasonable rates, as determined by the Board of Managers.

ARTICLE 8
DESIGNATION, RIGHTS, AUTHORITIES, POWERS,
RESPONSIBILITIES AND DUTIES OF OFFICERS AND AGENTS

     The Board of Managers by vote or
written resolution will have the power to appoint officers and agents to act for
the Company with such titles, if any, as the Board of Managers deems appropriate
and to delegate to such officers or agents such of the powers as are granted to
the Board of Managers hereunder, including the power to execute documents on
behalf of the Company, as the Board of Managers may determine; provided,
however, that no such delegation by the Board of Managers will cause the
Persons constituting the Board of Managers to cease to be the “managers” of the
Company within the meaning of the Act. The officers so appointed may include
persons holding titles such as Chairman, Chief Executive Officer, Chief
Operating Officer, President, Chief Financial Officer, Executive Vice President,
Vice President, Treasurer or Controller. Unless the authority of the officer in
question is limited in the document appointing such officer or is otherwise
specified by the Board of Managers, any officer so appointed will have the same
authority to act for the Company as a corresponding officer of a Nevada
corporation would have to act for a Nevada corporation in the absence of a
specific delegation of authority and as more specifically set forth in Schedule
8.1; provided, however, that unless such power is specifically
delegated to the officer in question either for a specific transaction or
generally in a separate writing, no such officer will have the power to lease or
acquire real property, to borrow money, to issue notes, debentures, securities,
equity or other interests of or in the Company, to make investments in (other
than the investment of surplus cash in the ordinary course of business) or to
acquire securities of any Person, to give guarantees or indemnities, to merge, liquidate
or dissolve the Company or to sell or lease all or any substantial portion of
the assets of the Company.

27

ARTICLE 9

BOOKS, RECORDS, ACCOUNTING AND
REPORTS

     Section 9.1 Books and
Records. 

     The Company will maintain at its
principal office or such other office as the Board of Managers will determine
such books and records with respect to the Company’s business as the Board of
Managers deems appropriate.

     Section 9.2 Reports. 

     The Company will use commercially
reasonable efforts to provide each Member a preliminary Schedule K-1 within 75
days after the end of each year, providing the Company’s reasonable best
estimate of such Member’s share of income, gains, loss, deductions and credits
of the Company for the prior year; and will provide a final Schedule K-1 to each
Member no later than April 15th after the end of such prior year. No Member or
other Member will be entitled to inspect, review, obtain or receive any
information about the Company and its Subsidiaries under Section 18-305 of the
Act, under this Agreement or otherwise, other than as set forth in Section
20.24(a), this Section 9.2 and Section 9.3 below, including with regard to
Schedule 3.1 to this Agreement (except with regard to the ownership information
specific to such Member or such Member, as applicable, contained therein).

     Section 9.3 Filings. 

     At the Company’s expense, the
Company will cause the income tax returns for the Company to be prepared and
timely filed with the appropriate authorities and to have prepared and to
furnish to each Member such information with respect to the Company (including a
schedule setting forth such Member’s distributive share of the Company’s income,
gain, loss, deduction and credit as determined for U.S. federal income tax
purposes) as is necessary to enable such Member to prepare such Member’s federal
and state income tax returns. The Company, at its expense, will also cause to be
prepared and timely filed, with appropriate federal and state regulatory and
administrative authorities, all reports required to be filed by the Company with
those entities under then current applicable laws, rules and regulations. Upon
the request of any Member, the Company shall file an election under Section 754
of the Code

     Section 9.4
Non-Disclosure.

     (a) Each Member (on behalf of
itself and, to the extent that such Member would be responsible for the acts of
the following persons under principles of agency law, its directors, managers,
officers, affiliates, equityholders, partners, employees, agents and members)
agrees that, except as otherwise consented to by the Board of Managers, all
non-public information furnished to such Member pursuant to this Agreement,
including confidential information of the Company and its Subsidiaries regarding
identifiable, specific and discrete business opportunities being pursued by the
Company or its Subsidiaries (collectively, “Confidential Information”)
will be kept confidential, will not be used for commercial or proprietary
advantage and will not be disclosed by such Member (or, to the extent that such
Member would be responsible for the acts of the following persons under
principles of agency law, its directors, managers, officers, affiliates,
equityholders, partners, employees, agents and members) in any manner, in whole
or in part, except that each Member will be permitted to disclose such
Confidential Information (i) to those of such Member’s agents, representatives
and employees who need to be familiar with such Confidential Information in
connection with such Member’s investment in the Company and who are charged with
an obligation of confidentiality, (ii) to such Member’s direct and indirect
partners and equityholders so long as they agree to keep such Confidential
Information confidential, (iii) with respect to Waterton, an Affiliate of
Waterton or an Affiliated Fund, as part of such Member’s normal reporting or
review procedure, in connection with such Member’s or its Affiliates’ normal
fund raising, marketing, investing, informational, reporting or operational
activities, (iv) as part of such Member’s normal reporting or review procedure
or obligations or in connection with and for the benefit of the business of the
Company or its Subsidiaries, (v) in connection with the Sale of the Company or
its Subsidiaries and/or a Public Offering, and/or (vi) to the extent required by
Law and the requirements of any applicable stock exchange, so long as such
Member will have first provided, to the extent permitted by applicable Law and
the requirements of such applicable stock exchange, the Company a reasonable
opportunity to contest the necessity of disclosing such Confidential
Information. Notwithstanding the foregoing, any Member and each of his, her or
its Representatives may disclose to any and all Persons, without limitation of
any kind, the tax treatment, tax strategies and tax structure of the Company and
all materials of any kind (including opinions or other tax analyses) that are
provided to the Member and his, her, or its Representatives relating to such tax
treatment, tax strategies and tax structure. Each Member agrees that he, she or
it will be responsible for any breach or violation of the provisions of this
Section 9.4(a) by any of his Representatives.

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     (b) For purposes of this Section
9.4, “Confidential Information” will not include any information: (i) of which
such Person (or its Affiliates) became aware prior to its affiliation with the
Company or any Subsidiary thereof, (ii) of which such Person (or its Affiliates)
learns from sources other than the Company or its Subsidiaries, whether prior to
or after such information is actually disclosed by the Company or its
Subsidiaries, or (iii) which is disclosed in a prospectus, public securities
filing or other documents generally available for dissemination to the public or
which have been disseminated to the public. Nothing in this Section 9.4 will in
any way limit or otherwise modify any confidentiality covenants entered into by
any Member pursuant to any other agreement to which such Member and the Company
or any of its Subsidiaries are parties.

ARTICLE 10 
TAX MATTERS MEMBER

     Section 10.1 Tax Matters
Member. 

     Unless and until another Member
is designated as the tax matters partner by the Board of Managers, the tax
matters partner of the Company as provided in the Regulations under Section 6231
of the Code and any analogous provisions of state law will be Waterton, and in
such capacity is referred to as the “Tax Matters Member.” The Tax Matters Member
shall inform each notice Member of all significant matters that may come to its
attention in its capacity as Tax Matters Member and shall forward to each notice
Member copies of all significant written communications it may receive in that
capacity no later than ten days after the date of receipt. During any Company
income tax audit or other income tax controversy with any governmental agency,
the Tax Matters Member shall keep the other Members promptly informed of all
material facts and developments. The Tax Matters Member shall give prompt notice
to the Members upon receipt of advice that the Internal Revenue Service or other
taxing authority intends to examine any income tax return, or records or books
of the Company. The Tax Matters Member shall not extend the statue of
limitations applicable to a Member without the Member’s written consent, shall
not enter into a settlement agreement that binds a Member without that Member’s
written consent, and shall not file an administrative adjustment request that
adversely affects a Member without that Member’s prior written consent.

     Section 10.2 Indemnity of Tax
Matters Member. 

     The Company will indemnify and
reimburse, to the fullest extent permitted by Law, the Tax Matters Member for
all expenses (including legal and accounting fees) incurred in its
representative capacity as Tax Matters Member pursuant to this Article 10 in
connection with any administrative or judicial proceeding with respect to the
tax liability of the Members attributable to their interests in the Company.

29

     Section 10.3 Tax Returns.

     Unless otherwise approved by the
Board of Managers, all tax returns of the Company will be prepared by the
Company’s independent certified public accountants. No later than twenty (20)
days prior to the due date (as may be extended) for any federal and state income
tax return of the Company, the Company shall provide a draft of such income tax
return to the Members for their review and comments, which shall be considered
in good faith in finalizing such tax return.

ARTICLE 11 
TRANSFER OF INTERESTS

     Section 11.1 Restricted
Transfer. 

     (a) No Member will directly or
indirectly Transfer all or any part of its Units or the economic or other rights
that comprise such Member’s Interest except in compliance with this Article 11
and Article 12, and any attempted Transfer not in compliance with the terms of
this Article 11 or Article 12 will be null and void and the Company will not in
any way recognize or give effect to any such Transfer, in each case to the
greatest extent permitted by applicable Law. In addition to the foregoing, no
Member will take any action or make any arrangement to avoid the provisions of
this Agreement, including by making one or more Transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party’s
interest in any such Permitted Transferee or by Transferring the securities of
any entity whose primary purpose is to hold (directly or indirectly) Units.
Transfers with respect to Units or Member’s Interests may only be undertaken and
completed in compliance with this Agreement and the restrictions on Transfer
contained herein.

     (b) Any Member who assigns any
Units or other interest in the Company (any such Member, an “Assignor”)
in accordance with this Article 11 or Article 12 will cease to be a Member of
the Company with respect to such Units or other interest and will no longer have
any rights or privileges of a Member with respect to such Units or other
interest (but will still be bound by this Agreement in accordance with this
Article 11). 

     (c) Subject to the terms of this
Article 11, any Person who acquires in any manner whatsoever any Units or other
interest in the Company (any such Person, an “Assignee”), irrespective of
whether such Person has accepted and adopted in writing the terms and provisions
of this Agreement, will be deemed by the acceptance of the benefits of the
acquisition thereof to have agreed to be subject to and bound by all of the
terms, conditions and obligations (but will be entitled to none of the rights or
benefits) of this Agreement that any transferor of such Units or other interest
in the Company of such Person was subject to or by which such transferor was
bound.

     (d) Notwithstanding anything to
the contrary in this Agreement, no Transfer will be made (directly or
indirectly), which would cause the Company to be treated as a “publicly traded
partnership” within the meaning of Section 7704(b) of the Code and/or Treasury
Regulation Section 1.7704 -1.

     (e) Notwithstanding anything to
the contrary herein, for purposes of Article 11 and Article 12, transfers by
Waterton or Gryphon (or any other Person holding interests in any entity holding
an Interest) of interests in any entity holding an Interest (such Transfers,
“Indirect Transfers”) will be treated as though such entity, in its
capacity as a Member, were making a Transfer of Interests, and in such event,
the provisions of Article 11 and Article 12 shall be read and construed so as to
provide the parties all of the same rights, terms, conditions and restrictions
with respect to any such Indirect Transfers as would pertain to Transfers of
Interests pursuant to such provisions.

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     Section 11.2 Permitted
Transferees. 

     A Member will be entitled to
Transfer such Member’s Interest to a Person (a “Permitted Transferee”) in
accordance with the following and subject to the other provisions of this
Article 11:

     (a) To the Company and
Waterton. Each Member will be entitled to Transfer such Member’s Interest to
Waterton and its Affiliated Funds. In furtherance of the foregoing, Gryphon
shall be entitled to Transfer all or any portion of its Interest to Waterton or
a Waterton Affiliate as set forth in the Credit Agreement in satisfaction of
payments due thereunder and as set forth in the Contribution Agreement in
satisfaction of any indemnifications or other amounts due to Waterton
thereunder. Each Member will be entitled to Transfer such Member’s Interest to
the Company as contemplated herein.

     (b) Compliance with
Agreement. Each Member will be entitled to Transfer all or any portion of
its Interest in compliance with the “drag along” provisions set forth in Section
12.1 and the “tag along” provisions set forth in Section 12.2.

     (c) Additional Permitted
Transfer by Waterton and Affiliates. Waterton and its Affiliates will be
entitled to Transfer directly or indirectly all or any portion of its Interest,
including indirectly through the Transfer of stock or other interest in Waterton
or its Affiliates (i) to any Person subject to the “drag along” right set forth
in Section 12.1 and the “tag along” right set forth in Section 12.2, (ii) to an
Affiliated Fund or other Affiliate of Waterton, (iii) to a liquidating trust,
such that de facto control of such liquidating trust is the same as (or held by
an Affiliate of) Waterton or (iv) to any investors in Waterton or any Affiliated
Funds. 

     (d) Discretionary Transfers.
Each Member will be entitled to Transfer such Member’s Interest if such
Member obtains the prior written consent of both the Board of Managers and
Waterton, which consent in each case may be given or withheld in their sole
discretion.

     Section 11.3 Transfer
Requirements. 

     Subject to the provisions of
Section 11.1, no Assignee (including a Permitted Transferee or a third-party
purchaser that complies with the requirements of Section 11.7) will be admitted
to the Company as a Member unless the following conditions are satisfied or such
conditions are waived by the Board of Managers:

     (a) A duly executed written
instrument of Transfer is provided to the Board of Managers, specifying the
Interests being transferred and setting forth the intention of the Member
effecting the Transfer that the transferee succeed to a portion or all of such
Member’s Interest as a Member;

     (b) A duly executed Joinder
signed by the Assignee and each party thereto is provided to the Board of
Managers and the remaining Members;

     (c) If requested by the Board of
Managers, an opinion of responsible counsel (who may be counsel for the Company)
is provided to it, reasonably satisfactory in form and substance to the Board of
Managers to the effect that:

     (i) such
Transfer would not violate the Securities Act or any Canadian or other state
securities or blue sky laws applicable to the Company or the Interest to be
transferred;

     (ii) such
Transfer would not cause the Company to be considered a publicly traded
partnership under Section 7704(b) of the Code; and

     (iii)
such Transfer would not cause the Company to lose its status as a partnership
for U.S. federal income tax purposes; and

31

     (d) The Member effecting the
Transfer and the transferee execute any other instruments, documents or
certificates that the Board of Managers deems necessary or desirable for
admission of the transferee, including the written acceptance by the transferee
of this Agreement and such transferee’s agreement to be bound by and comply with
the provisions hereof and execution and delivery to the Board of Managers of a
special power of attorney as provided in Section 20.4.

     (e) The Member effecting the
Transfer or the transferee pays to the Company a transfer fee in an amount
sufficient to cover the reasonable expenses incurred by the Company in
connection with the admission of the transferee and provides to the Company any
information necessary for the Company to make required basis adjustments and
comply with tax reporting requirements.

     Section 11.4 Consent. 

     Each Member hereby agrees that
upon satisfaction of the terms and conditions of this Article 11 with respect to
any proposed Transfer (but only upon such satisfaction), the Person proposed to
be such Assignee may be admitted as a Member.

     Section 11.5 Withdrawal of
Member. 

     If a Member Transfers all of its
Interest pursuant to Section 11.1 and the Assignee of such interest is admitted
as a Member pursuant to Section 11.4, such Assignee will be admitted to the
Company as a Member effective on the effective date of the Transfer or such
other date as may be specified when the Assignee is admitted and, if such
Assignor has not already ceased to be a Member pursuant to Section 11.1(b), then
immediately following such admission the Assignor will cease to be a Member of
the Company. Upon the Assignor ceasing to be a Member, the Assignor will not be
entitled to any Distributions from and after the date of such Transfer.
Notwithstanding the admission of an Assignee as a Member and except as otherwise
expressly approved by the Board of Managers, the Assignor will not be released
from any obligations to the Company as a Member (or otherwise) existing as of
the date of the Transfer, including without limitation, the obligations set
forth in Section 5.3, Section 9.4 and Section 16.6.

     Section 11.6 Additional
Transfer Restrictions. 

     Notwithstanding anything to the
contrary contained herein, if the Transfer is a grant of a pledge, security
interest, lien or encumbrance on or with respect to Units to secure a loan or
other indebtedness or obligation of a Member, such Transfer is subject to the
further, additional terms and conditions: (a) such Transfer shall be granted
only in a bona fide transaction, (b) such Transfer will be made only with the
prior written consent of the Board of Managers, (c) such Transfer shall be
subject to the condition that the holder of such pledge, security interest, lien
or encumbrance (the “Chargee”) first enters into a written agreement with
the other Members in form and substance satisfactory to such Members in their
sole discretion, binding on the Chargee, to the effect that: (i) the Chargee
shall not enter into possession or institute any proceedings for foreclosure or
partition of the encumbering Member’s Interest and that such pledge, security
interest, lien or encumbrance shall be subject to the provisions of this
Agreement, (ii) the Chargee’s remedies with respect to such pledge, security
interest, lien or encumbrance shall be limited to the sale of the whole (but
only the whole) of such Member’s Interest to the Company or the other Member for
an amount equal to the outstanding principal amount or other obligations plus
all accrued interest, fees, costs or expenses, or, failing the completion of a
sale to the Company or the other Member due to the rejection by the Company and
the other Member of the opportunity to acquire such Interest (unless such
failure is caused by the encumbering Member or by the Chargee), such sale to be
held at a public auction at least sixty (60) days after prior written notice to
the other Member containing a detailed description of the terms and conditions
of such sale and such sale to be subject to the purchaser delivering an executed
Joinder and entering into a written agreement with the remaining Members (on
terms and conditions satisfactory to the remaining Members) whereby such
purchaser assumes all obligations of the encumbering Member and agrees to abide
and be bound by this Agreement, (iii) the Chargee shall fully satisfy and
discharge its right and interest in any such sale and shall promptly release its
pledge, security interest, lien or encumbrance with respect to such Interest,
(iv) the pledge, security interest, lien or encumbrance shall be subordinate to
any then-existing debt, including any project financing, approved by the Board of
Managers and encumbering the transferring Member’s Interest, and (v) prior to
any Transfer of Interests, any advances that have been made by the Company or
its Subsidiaries to such Member and not repaid or any other amounts owing by
such Member to the Company shall be repaid to the Company and fully
satisfied.

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     Section 11.7 Right of
First Refusal.

     (a) Except for Transfers
permitted by Section 11.2, no Member (for the purposes of this Section, a
“Selling Member”) may Transfer all or any portion of its Interest to any
Person, unless the Selling Member first provides a written offer notice (an
“Offer Notice”) to the other Member (for the purposes of this Section,
the “Notified Member”) stating that the Selling Member desires to
Transfer all or a portion of its Interest, designating the specific portion of
the Interest (the “Offered Interest”) that the Selling Member desires to
Transfer and specifying the proposed purchase price (the “Offered Price”)
and all of the other proposed terms and conditions of the proposed Transfer of
the Offered Interest with reasonable specificity (the “Offered
Terms”).

     (b) The Notified Member shall
have the right and option, but not the obligation, for a period of sixty (60)
days after its receipt of the Offer Notice, to exercise its option and elect to
purchase all, but not less than all, of the Offered Interest for the Offered
Price and on the Offered Terms. Any such election and exercise shall be made by
providing written notice of such election to the Selling Member within such
sixty (60) day period.

     (c) If the Notified Member timely
elects to purchase the Offered Interest, the parties shall close and consummate
the sale of the Offered Interest for the Offered Price and on the Offered Terms
on the later of (i) thirty (30) days after the Notified Member provides written
notice of its election to purchase the Offered Interest, and (ii) twenty (20)
days after the receipt of all required consents and approvals, if any, with
respect to such Transfer. If the Notified Member does not elect to purchase the
Offered Interest or the Notified Member fails to close and consummate the
purchase thereof within the time period specified above, the Selling Member may
Transfer all, but not less than all, of the Offered Interest to any third-party
purchaser during the later of (1) the ninety (90) day period after the
expiration of the above-described exercise period, or (2) if the Notified Member
elects to purchase but fails to close within the time period specified above,
the ninety (90) day period after the expiration of such period, but only for
consideration that is greater than or equal to the Offered Price and on the
Offered Terms, and otherwise in accordance with the terms and conditions for a
transfer of Interest provided in this Agreement (including those set forth in
Section 11.3); provided, that if the failure to close the purchase by the
Notified Member is due to the fault or breach by the Selling Member, then the
Selling Member shall have no right to Transfer the Offered Interest to any
third-party purchaser; provided, further that any attempted
Transfer to a third-party purchaser for a price less than the Offered Price or
on terms more favourable than the Offered Terms shall be null and void and shall
not be recognized by the Company. If the Selling Member does not complete a
Transfer of the Offered Interest in accordance with the terms described above
within the foregoing ninety (90) day period, the right of the Selling Member to
Transfer to a third-party purchaser shall terminate and the Selling Member shall
again afford the Notified Member the purchase rights in this Section 8.7 with
respect to any offer to Transfer or otherwise dispose of all or any portion of
the Offered Interest or any other Interest held by the Selling Member.

     Section 11.8 Amendment of
Schedule 3.1. 

     In the event of the admission of
any transferee or Assignee as a Member of the Company, the Board of Managers
will promptly amend Schedule 3.1 to reflect such Transfer or admission, as the
case may be.

33

ARTICLE 12
“DRAG ALONG” AND “TAG ALONG”
RIGHTS

     Section 12.1 Drag Along.

     Each Member hereby agrees that if
the Waterton Group Members seek to pursue a Sale of the Company, a direct or
indirect sale of some or all of the Interests or assets of the Company or a
direct or indirect sale of some or all of the stock or equity interests of
Waterton (a “Drag Along Sale”) to a prospective buyer (a “Prospective
Buyer”), for so long as the Waterton Group Members hold over 50.1% of the
Class A Units, each direct and indirect Member of the Company will be deemed to
have provided any applicable consent to (and, if requested, to confirm such
consent in writing to), and agrees to raise no objections against, such Drag
Along Sale, and, if applicable, each Member will Transfer in such Drag Along
Sale the same percentage of each class of Units held by such Member as the
percentage of any class of Units held by Waterton that the Waterton Group
Members propose to, directly or indirectly, Transfer (a “Drag Along Sale
Percentage”), directly or indirectly, to a Prospective Buyer in the manner
and on the terms set forth in this Section 12.1 in connection with such Drag
Along Sale, and will further comply with this Section 12.1 as follows:

     (a) Exercise. If Waterton
elects to exercise its rights under this Section 12.1, it will furnish a written
notice (the “Drag Along Notice”) to each other Member. The Drag Along
Notice will set forth the principal terms of the proposed Drag Along Sale
(including, if applicable, the terms of any related Transfer) insofar as it
relates to Units including, if applicable, (i) the total number and class of
Units to be acquired, directly or indirectly, by the Prospective Buyer in the
Drag Along Sale, (ii) the number and class of Units to be acquired from the
Waterton Group Members, (iii) the Drag Along Sale Percentage for each applicable
class of Units, (iv) the estimated consideration per respective Unit to be
received in the proposed Transfer, and (v) the name and address of the
Prospective Buyer. If a Waterton Group Members consummates the proposed Drag
Along Sale to which reference is made in the Drag Along Notice, each Member
(each a “Drag Along Seller”) will be bound and obligated by the terms of
such Drag Along Sale and, if applicable, will be bound and obligated to Transfer
the Drag Along Sale Percentage of each class of Units held by such Member in the
Drag Along Sale on the same economic terms and conditions (subject to Section
12.2(e)), with respect to each Unit Transfer, as the Waterton Group Member will
Transfer each Unit in the Drag Along Sale; provided that, if the Waterton
Group Member receives cash in a Drag Along Sale and any other Member receives
securities in lieu of such cash consideration in such Drag Along Sale (i.e. a
rollover or reinvestment transaction), such securities will be deemed to be the
same form of consideration as the consideration the Waterton Group Members
receive so long as such securities are of substantially equivalent value as the
cash consideration paid to the Waterton Group Members and will be deemed to be
on the same economic terms and conditions.

     (b) Approval Rights. Each
Member hereby acknowledges and agrees that, in connection with a Sale of the
Company or a sale of some or all of the Interests or assets of the Company or
any of its Subsidiaries, such Member is not entitled to any dissenter’s rights,
appraisal rights or similar rights under Section 18-210 of the Act or otherwise,
and hereby waives all related claims (including any for breach of fiduciary duty
arising out of or related to any good faith Sale of the Company or Public
Offering).

     Section 12.2 Tag Along.

     If Waterton, a Permitted
Transferee thereof or any Affiliated Fund proposes to Transfer, directly or
indirectly, any Units held by it (“Waterton Units”) to a Prospective
Buyer in a transaction (a “Tag Along Transfer”) which is not (A) to a
Permitted Transferee under the terms of Section 11.2(c)(ii), (iii) or (iv), or
(B) a Transfer in connection with which Waterton has elected to exercise its
“drag along” rights under Section 12.1:

     (a) Notice. Waterton will
deliver a written notice (the “Tag Along Notice”) to each Member holding
the same class or classes of Units held by Waterton (each, a “Tag Along
Holder”), at least ten Business Days prior to such Tag Along Transfer. The
Tag Along Notice will include:

34

     (i) The
principal terms of the proposed Tag Along Transfer insofar as it relates to such
Waterton Units, including (A) the number and class of Waterton Units to be
purchased, directly or indirectly, from the Waterton Group Members, (B) the
fraction, expressed as a percentage, determined by dividing the number of each
class of Waterton Units to be purchased, directly or indirectly, from the
Waterton Group Members by the total number of each such class of Waterton Units
held by the Waterton Group Members (each a “Tag Along Transfer
Percentage”), (C) the estimated purchase price per respective Unit or
formula for determining such price, (D) the anticipated form of consideration
for each such Waterton Unit, (E) the name and address of the Prospective Buyer
and (F) the expected closing date for the Transfer; and

     (ii) An
invitation to each Tag Along Holder to make an offer to include in the Tag Along
Transfer to the applicable Prospective Buyer an additional number of issued and
outstanding Units of each class held by such Tag Along Holder that are of the
same class being proposed for Transfer by the Waterton Group Members (not in any
event to exceed the product of the Tag Along Transfer Percentage multiplied by
the total number of Units of each class held by such Tag Along Holder), on the
same economic terms and conditions with respect to each such class of Units as
the Waterton Group Members will Transfer, directly or indirectly, each of their
respective class of Units, provided that if the Waterton Group Members are
Transferring, directly or indirectly, multiple classes of Units, each Tag Along
Holder may be required to Transfer the same classes of Units in the same
proportion as the Waterton Group Members.

     (b) Exercise. Within ten
Business Days after the delivery of the Tag Along Notice, each Tag Along Holder
desiring to make an offer to include any outstanding Units in the Tag Along
Transfer (each a “Tag Along Seller”) will furnish a written notice (the
“Tag Along Offer”) to Waterton offering to include a number of issued and
outstanding Units (not in any event to exceed the product of the Tag Along
Transfer Percentage multiplied by the total number of Units of the applicable
class held by such Tag Along Holder) which such Tag Along Seller desires to have
included in the Tag Along Transfer. Each Tag Along Holder who does not timely
accept Waterton’s invitation will be deemed to have waived all of its rights
with respect to such Tag Along Transfer, and the Waterton Group Members and the
Tag Along Sellers will thereafter be free to Transfer to the Prospective Buyer,
at a price per respective Unit no more than 110% of the price per applicable
class of Units set forth in the Tag Along Notice, without any further obligation
to such non-accepting Tag Along Holder. 

     (c) Irrevocable Offer. The
offer of each Tag Along Seller contained in his, her or its Tag Along Offer will
be irrevocable, and, to the extent such offer is accepted, such Tag Along Seller
will be bound and obligated to Transfer in the Tag Along Transfer at the same
price and on the same economic terms and conditions, with respect to each
applicable class of Units, as the Waterton Group Members, up to such number of
applicable class of Units as such Tag Along Seller will have specified in his,
her or its Tag Along Offer; provided, however, that if the
principal terms of the Tag Along Transfer change with the result that any price
per respective Unit will be less than 90% of the price per applicable Unit set
forth in the Tag Along Notice, each Tag Along Seller will be permitted to
withdraw the offer contained in his, her or its Tag Along Offer and will be
released from his, her or its obligations thereunder. 

     (d) Reduction of Units
Transferred. Waterton will attempt to obtain the inclusion in the proposed
Transfer of the entire number of Units which each of the Waterton Group Members
and the Tag Along Sellers requested to have included in the Tag Along Transfer
(as evidenced in the case of the Waterton Group Members by the Tag Along Notice
and in the case of each Tag Along Seller by such Tag Along Seller’s Tag Along
Offer). In the event Waterton is unable to obtain the inclusion of such entire
number of Units in the Tag Along Transfer, the number of Units to be Transferred
in the Tag Along Transfer will be allocated among the Waterton Group Members and
the Tag Along Sellers in proportion, as nearly as practicable, to the respective number of each
applicable class of Units which each of the Waterton Group Members and Tag Along
Sellers requested to be included in the Tag Along Transfer.

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     Section 12.3
Miscellaneous. 

     The following provisions will
apply to any Drag Along Sale or Tag Along Transfer:

     (a) Further Assurances.
The Company will, and will cause its Subsidiaries to, and each Drag Along Seller
and Tag Along Seller (each, a “Participating Seller”), whether in his,
her or its capacity as a Participating Seller, Member, director, manager,
employee or officer of the Company or any of its Subsidiaries, or otherwise,
will take or cause to be taken all such actions as may be necessary, reasonably
desirable or otherwise requested by Waterton in order to expeditiously pursue
and consummate each Drag Along Sale or Tag Along Transfer and any related
transactions (including any auction or competitive bid process in connection
with or prefaced in anticipation of such Transfer), including executing,
acknowledging and delivering transfer agreements, sale agreements, escrow
agreements, consents, assignments, releases of claims relating to their interest
in the Company (including claims against the Company, any Board Manager,
Waterton, Gryphon and the Prospective Buyer in a Drag Along Sale whether in
connection with, prior to or subsequent to such Drag Along Sale), waivers, and
any other documents or instruments which in each case are no more burdensome
than those executed by the Waterton Group Members; furnishing information and
copies of documents; filing applications, reports, returns, filings and other
documents or instruments with governmental authorities that are commercially
reasonable or otherwise required by Law; and otherwise cooperating with
Waterton, the Prospective Buyer and their respective Representatives; attending
diligence meetings and responding to diligence requests; engaging outside
advisors (including investment banking, accounting and law firms), in each case
acceptable to Waterton in its sole discretion. Immediately prior to the
effectiveness of any Asset Sale Distribution, Public Offering, Drag Along Sale
or Tag Along Transfer, any advances that have been made to Members and not
repaid shall be repaid to the Company (or, to the extent there is no economic,
tax or other detriment to the other Members resulting therefrom, such advances
may be repaid out of the proceeds to be received by such Members in a sale
transaction), and any Member guarantees shall be released. In connection with a
Drag Along Sale or a Tag Along Transfer, each participating Member will be
obligated to join up to such Member’s pro rata share (based on such Member’s
percentage ownership, directly or indirectly, of Class A Units) in any purchase
price adjustments, indemnification or other obligations that the sellers of
Units, other equity interests or assets are required to provide in connection
with the Draft Along Sale or Tag Along Transfer such that proceeds will be
distributed as if they had been distributed after giving effect to such
adjustments, indemnification and other obligations (other than any such
obligations that related solely to a particular Member, such as indemnification
with respect to representations and warranties given by a Member regarding such
Member’s title to and ownership of securities or covenants of such Member, in
respect of which only such Member will be liable). Each Participating Seller
hereby grants to Waterton an irrevocable power of attorney to sign any and all
agreements and instruments that are being executed in connection with a Drag
Along Sale, Tag Along Transfer or Sale of the Company pursuant to this Agreement
and that are in accordance with the provisions of this Agreement on behalf of
such Participating Seller in its capacity as a Member of the Company. In
connection with any Transfer or Sale of the Company required by this Article 12,
each Participating Seller (i) appoints Waterton or its designee as its
representative to make all decisions in connection with any sale agreement
(including the right to resolve any potential indemnification claims or other
disputes on behalf of all Members) and (ii) hereby grants to Waterton and its
designee an irrevocable proxy coupled with an interest to vote its, his or her
Units (which proxy shall be valid and remain in effect until the provisions of
this Section 12.3(a) expire pursuant to Section 12.3(d)) in connection with, or
in furtherance of, the exercise by Waterton of its rights under this Article
12.

36

     (b) Process. Waterton
will, in its sole discretion, decide whether or not to pursue, consummate,
postpone or abandon any Drag Along Sale or Tag Along Transfer and the terms and
conditions thereof. Neither Waterton nor any of its Affiliates will have any
liability to any other holder of Units arising from, relating to or in
connection with the pursuit, consummation, postponement, abandonment or terms
and conditions of any Drag Along Sale or Tag Along Transfer except to the extent
Waterton will have failed to comply with the provisions of this Article 12.

     (c) Expenses. All
reasonable costs and expenses incurred by the Waterton Group Members, Gryphon,
their respective Affiliates or the Company in connection with any proposed Drag
Along Sale or Tag Along Transfer pursuant to this Article 12 (whether or not
consummated), including all attorney’s fees and expenses, all accounting fees
and charges and all finders, brokerage or investment banking fees, charges or
commissions, will be either (i) borne by the Members based upon such Member’s
pro rata share such that proceeds from any Transfer or Sale of the Company will
be distributed as if they had been distributed after giving effect to such costs
and expenses or (ii) paid or reimbursed by the Company. The reasonable fees and
expenses of a single legal counsel representing any or all of the other
Participating Sellers in connection with any proposed Drag Along Sale or Tag
Along Transfer pursuant to this Article 12 (whether or not consummated) will be
paid or reimbursed by the Company. Any other costs and expenses incurred by or
on behalf of any or all of the other Participating Sellers in connection with
any proposed Drag Along Sale or Tag Along Transfer pursuant to this Article 12
(whether or not consummated) will be borne by such Participating Sellers.

     (d) Closing. The closing
of a Transfer or Sale of the Company to which this Article 12 applies will take
place at such time and place as Waterton will specify by notice to each
Participating Seller. At the closing of such Drag Along Sale or Tag Along
Transfer, each Participating Seller will, if applicable, deliver the
certificates evidencing the Units to be Transferred by such Participating
Seller, duly endorsed for transfer with signature guaranteed, free and clear of
any liens or encumbrances, with any necessary transfer tax stamps affixed,
against delivery of the applicable consideration.

     (e) Sale Distributions.
Notwithstanding any other provision of this Agreement, in the event that a
Transfer or Sale of the Company is consummated in accordance with this Article
12, the net proceeds of such Drag-Along Sale shall be distributed as follows:
(A) first, the Company shall distribute to Waterton, and Waterton will receive,
an amount equal to the value of Waterton’s initial Capital Contribution, which
is an amount equal to $17,000,000, (B) second, the Company shall distribute to
each Member an amount equal to the aggregate amount of all Capital Contributions
actually made by such Member following such Member’s initial Capital
Contribution on a pro rata basis in accordance with the Capital
Contributions made by such Member, up to the aggregate amount of such Capital
Contributions, then (C) following the foregoing Distributions and payments, the
remaining net proceeds of such Asset Sale (if any) shall be distributed among
the Members pro rata in accordance with each Member’s Interest (after
taking into account any pro forma adjustments based on Section 3.7(e))
..

     (f) Compliance with Applicable
Law. The terms and conditions of the closing of a Transfer or Sale of the
Company to which this Article 12 applies will comply in all material respect
with all applicable Laws. 

ARTICLE 13
 PRE-EMPTIVE RIGHTS

     Section 13.1 Pre-emptive
Rights. 

     The Company will not issue or
sell any Units or any other equity interests to any Member, including Waterton,
an Affiliated Fund, or Gryphon, or to any third party (each an “Issuance” of “Subject Securities”),
except in compliance with the provisions of this Article 13.

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     Section 13.2 Participation
Notice. 

     Not fewer than thirty (30)
Business Days prior to the consummation of the Issuance, a written notice (the
“Participation Notice”) will be given by the Company pursuant to Section
20.3 to each Member that holds Class A Units and is not an Excluded Member. The
Participation Notice will include:

     (a) The principal terms of the
proposed Issuance, including (i) the amount and kind of Subject Securities to be
included in the Issuance, (ii) the number of Subject Securities, (iii) the price
per unit of the Subject Securities, (iv) the portion of the Issuance equal to
the number of Class A Units held by such holder immediately prior to the
Issuance divided by the aggregate number of Class A Units outstanding
immediately prior to the Issuance (the “Participation Portion”) and (v)
the name and address of each Person to whom the Subject Securities are proposed
to be issued (each a “Prospective Subscriber”); and

     (b) An offer by the Company to
issue or cause to be issued, at the option of each holder of Units to which a
Participation Notice is required to be given, to such holder such portion of the
Subject Securities to be included in the Issuance as may be requested by such
holder (not to exceed the Participation Portion of the total amount of Subject
Securities to be included in the Issuance), at the same price and otherwise on
the same economic terms and conditions, with respect to each unit of Subject
Securities issued to such holders of Units, as the issuance to each of the
Prospective Subscribers; provided that, if all holders of Units entitled to
purchase or receive any class or series of Subject Securities are required to
also purchase any other class or series of Subject Securities, the Prospective
Subscribers exercising their rights pursuant to this Article 13 will also be
required to purchase the same strip of securities (on the same terms and
conditions) that such other holders of Units are required to purchase.

     Section 13.3 Participation
Commitment. 

     Each holder of Units desiring to
accept the offer contained in the Participation Notice will send an irrevocable
commitment (each, a “Participation Commitment”) to the Company within
fifteen (15) Business Days after the effectiveness (in accordance with Section
13.2) of the Participation Notice specifying the number (not in any event to
exceed the product of the Participation Portion multiplied by the aggregated
number of securities in the Issuance) or proportion (not in any event to exceed
the Participation Portion) of Subject Securities which such holder desires to be
issued (each, a “Participation Buyer”). Each holder of Units which has
not so accepted such offer, or that does not comply with Section 13.6, will be
deemed to have waived all of such holder’s rights with respect to the Issuance
under this Article 13, and the Company will thereafter be free to issue the
Subject Securities in such Issuance to the Prospective Subscribers and any
Participating Buyers at a price not less than 90% of the price set forth in the
Participation Notice, without any further obligation to such non-accepting
holders under this Article 13. If, prior to consummation, the terms of such
proposed Issuance will change with the result that the price will be less than
90% of the price set forth in the Participation Notice, it will be necessary for
a separate Participation Notice to be furnished, and the terms and provisions of
this Article 13 separately complied with, in order to consummate such Issuance
pursuant to this Article 13; provided, however, that in the case of such a
separate Participation Notice, each applicable period to which reference is made
in this Article 13 will be the longer of (a) the remaining portion of the 15
Business Day period applicable to the first Participation Notice distributed in
connection with such proposed Issuance or (b) five (5) Business Days.

     Section 13.4 Acceptance.

     The Participation Commitment of
each Participating Buyer will be irrevocable except as hereinafter provided, and
each such Participating Buyer will be bound and obligated to acquire in the
Issuance on the same economic terms and conditions as the Prospective
Subscribers, with respect to each share of Subject Securities issued, such
number or proportion of Subject Securities as such Participating Buyer will have
specified in such Participating Buyer’s Participation Commitment.

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     Section 13.5 Failure to
Consummate. 

     If at the end of the 240th day
following the date of the effectiveness (in accordance with Section 13.2) of the
Participation Notice the Company has not completed the Issuance on the terms and
conditions specified in such Participation Notice, each Participating Buyer will
be released from its obligations under such Participating Buyer’s Participation
Commitment, the Participation Notice will be null and void, and it will be
necessary for a separate Participation Notice to be furnished, and the terms and
provisions of this Article 13 separately complied with, in order to consummate
any Issuance subject to this Article 13.

     Section 13.6 Cooperation.

     Each holder of Units, whether in
his, her or its capacity as a Participating Buyer, officer or Board Manager of
the Company, or otherwise, will take or cause to be taken all such reasonable
actions as may be necessary, reasonably desirable or otherwise requested by the
Company in order expeditiously to consummate each Issuance pursuant to this
Article 13 and any related transactions, including executing, acknowledging and
delivering consents, assignments, waivers and other documents or instruments,
filing applications, reports, returns, filings and other documents or
instruments with governmental authorities, refraining from dissenting to any
such Issuance and related transactions, and otherwise cooperating with the
Company, the Prospective Subscribers and the Participating Buyers (if any).
Without limiting the generality of the foregoing, each such Participating Buyer
and holder of Units agrees to execute and deliver such Ancillary Documents to
which the Prospective Subscriber will be party.

     Section 13.7 Closing. 

     The closing of an Issuance
pursuant to this Article 13 will take place at such time and place as the
Company will specify by notice to each Participating Buyer in accordance with
Section 20.3. At the closing of any Issuance under this Article 13, each
Participating Buyer will be delivered the certificates or other instruments, if
any, evidencing the Subject Securities to be issued to such Participating Buyer,
registered in the name of such Participating Buyer or his, her or its designated
nominee, free and clear of any liens or encumbrances, with any transfer tax
stamps affixed, against delivery by such Participating Buyer of the applicable
consideration.

     Section 13.8 Exceptions.

     Notwithstanding the foregoing,
the Company may proceed with any Issuance without having complied with the
provisions of Section 13.2 with respect to any issuances (a) in connection with
a bona fide compensation arrangement approved by the Board of Managers, (b) to
the owner or owners of another business in connection with any business
combination or as consideration in a business acquisition transaction, in either
case, involving the Company or any of its direct or indirect Subsidiaries, (c)
in connection with a Public Offering, (d) of warrants in connection with the
incurrence of any indebtedness approved by the Board of Managers, (e) to any
Person (other than an existing Members on the date of such issuance or such
Member’s Affiliates or their respective directors and officers) which is
reasonably determined in good faith by the Board of Manager to be strategically
beneficial to the operations of the Company, (f) of Interests representing less
than five percent (5%) in the aggregate of the Interests outstanding on the date
hereof that are issued to one or more employees of the Company or any of its
Subsidiaries at a price per Unit of not conspicuously less than Fair Market
Value (except if reasonable anti-dilution protection, in the opinion of the
Board of Managers, is extended to all Members) or (g) of Units on or prior to
the date hereof; provided that in each case such transaction has been
approved by its Board of Managers in accordance with Section 7.2. 

     Section 13.9 Compliance.

     Nothing in this Article 13 will
be deemed to prevent Waterton Group Members and their respective Affiliates from
purchasing for cash any Subject Securities without first complying with the
provisions of this Article 13; provided that in connection with such
purchase, (i) the Company gives prompt notice to each other Member that holds
Class A Units and is not an Excluded Member, which notice will describe in reasonable
detail the Subject Securities being purchased by the Person(s) making such
purchase (the “Purchasing Holder”) and the purchase price therefor and
(ii) the Purchasing Holder and the Company will, as soon as practicable (and in
any event not later than 90 days following such purchase by the Purchasing
Holder), take all steps necessary to enable the other Members that hold Class A
Units and are not Excluded Members to effectively exercise their respective
rights under this Article 13 with respect to their purchase of a pro rata
portion of the Subject Securities issued to the Purchasing Holder after such
purchase; provided that in each case such transaction has been approved
by its Board of Managers in accordance with Section 7.2.

39

ARTICLE 14 

PROGRAMS AND BUDGETS

     Section 14.1 Operations Under
Programs and Budgets. 

     Except as otherwise provided in
this Agreement, Operations shall be conducted, expenses shall be incurred and
Assets shall be acquired consistent with Programs and Budgets duly adopted by
the Board of Managers as detailed in Schedule 14.1.1. Each Program and Budget
shall detail the Operations to be conducted and the objectives to be
accomplished by the Company for the period of time set forth therein and shall
include: (a) accrual of reasonably anticipated Environmental Compliance expenses
for all Operations contemplated under the Program and Budget, and (b) payment of
all obligations and liabilities of the Company and its Subsidiaries under
leases, contracts and agreements of the Company and its Subsidiaries and all
other costs and expenses necessary or appropriate for the development and
Operation of the Properties and the long-term business success of the Company.
The initial Program and Budget, which has been adopted by the Members, is
attached as Schedule 14.1.2.

ARTICLE 15 
DISSOLUTION OF COMPANY

     Section 15.1 Termination of
Membership. 

     No Member will resign or withdraw
from the Company except for (a) any Transfer of its Interest in the Company
expressly in compliance with the restrictions on Transfer set forth in Article
11, whereupon a transferee may become a Member in place of the Member assigning
such Interest, and (b) the deemed resignation of a Member pursuant to Section
3.11. The death, retirement, resignation, expulsion, bankruptcy or dissolution
of any Member or the occurrence of any other event that terminates the continued
membership of any Member will not in and of itself cause the Company to be
dissolved or its affairs to be wound up, and upon the occurrence of any such
event, the Company will be continued without dissolution.

     Section 15.2 Events of
Dissolution. 

     The Company will be dissolved
upon the happening of any of the following events: (a) the entry of a decree of
judicial dissolution under Section 18-802 of the Act, (b) the majority vote of
the Board of Managers in accordance with Section 7.2 and the consent of Waterton
or (c) the termination of the legal existence of the last remaining Member or
the occurrence of any other event which terminates the continued membership of
the last remaining Member unless the business of the Company is continued in a
manner permitted by this Agreement and the Act. 

     Section 15.3 Liquidation.

     Upon dissolution of the Company
for any reason, the Company will immediately commence to wind up its affairs. A
reasonable period of time will be allowed for the orderly termination of the
Company’s business, discharge of its liabilities, and distribution or
liquidation of its remaining assets so as to enable the Company to minimize the
normal losses attendant to the liquidation process. The Company’s property and
assets or the proceeds from the liquidation thereof will be distributed so as
not to contravene the Act and will be otherwise distributed to the Members as
set forth in Section 5.1(d) . A full accounting of the assets and
liabilities of the Company will be taken and a statement thereof will be
furnished to each Member promptly after the distribution of all of the assets of
the Company. Such accounting and statements will be prepared under the direction
of the Board of Managers.

40

     Section 15.4 No Action for
Dissolution. 

     The Members acknowledge that
irreparable damage would be done to the goodwill and reputation of the Company
if any Member should bring an action in court to dissolve the Company under
circumstances where dissolution is not required by Section 15.2. This Agreement
has been drawn carefully to provide fair treatment of all parties and equitable
payment in liquidation of the Interests of all Members. Accordingly, except
where the Board of Managers has failed to liquidate the Company as required by
Section 15.3 and except as specifically provided in Section 18-802 of the Act,
each Member hereby waives and renounces its right to initiate legal action to
seek dissolution, to seek partition of assets, or to seek the appointment of a
receiver or trustee to liquidate the Company.

     Section 15.5 No Further
Claim. 

     Upon dissolution, each Member
will have recourse solely to the assets of the Company for the return of such
Member’s capital, and if the Company’s property remaining after payment or
discharge of the debts and liabilities of the Company, including debts and
liabilities owed to one or more of the Members, is insufficient to return the
aggregate Capital Contributions of each Member, such Member will have no
recourse against the Company, the Board of Managers or any other Member.

     Section 15.6 Distribution of
Subsidiary Equity. 

     In the event that immediately
prior to its dissolution the Company holds common stock or other equity
interests in any direct Subsidiary of the Company with over 50% of the then
outstanding ordinary voting power to elect members of such Subsidiary’s board of
directors or board of managers, the Company will cause such Subsidiary, prior to
and in contemplation of such dissolution and the distribution to Members of the
stock of such Subsidiary, to offer to enter into agreements with the Members
granting to such Members directly the same rights, subject to substantially the
same obligations, with respect to such Subsidiary as they possess with respect
to the Company and each other Member, immediately prior to such dissolution,
with all rights of the Board of Managers being transferred to the board of
directors (or similar governing body) of such Subsidiary. All Members hereby
agree to take all reasonable actions in connection with the foregoing, including
(a) the execution of all such agreements with such Subsidiary and the execution
of such additional documents and instruments as may be requested by the Board of
Managers and (b) if such common stock or other equity interests of such
Subsidiary have been offered in a Public Offering, the execution of any
holdback, lockup or similar agreement requested by Waterton in connection with
such Public Offering.

ARTICLE 16 
INDEMNIFICATION

     Section 16.1
Indemnification Rights.

     (a) General. To the
fullest extent permitted by Law, the Company will indemnify, defend and hold
harmless each Board Manager, each officer, director or manager of the Company,
Waterton, Gryphon, the Tax Matters Member and each of their respective
Affiliates (all indemnified persons being referred to as “Indemnified
Persons” for purposes of this Article 16), from any liability, loss or
damage incurred by the Indemnified Person by reason of any act performed or
omitted to be performed by the Indemnified Person in connection with the
business and Operations of the Company or any of its Subsidiaries and from
liabilities or obligations of the Company or any of its Subsidiaries imposed on
such Person by virtue of such Person’s position with the Company or
any of its Subsidiaries, including reasonable attorneys’ fees and costs and any
amounts expended in the settlement of any such claims of liability, loss or
damage; provided, however, that if the liability, loss, damage or
claim arises out of any action or inaction of an Indemnified Person,
indemnification under this Section 16.1 will be available only if such action or
inaction was not expressly prohibited by this Agreement and (i) either (A) the
Indemnified Person, at the time of such action or inaction, determined in good
faith that its, his or her course of conduct was in, or not opposed to, the best
interests of the Company or any of its Subsidiaries or (B) in the case of
inaction by the Indemnified Person, the Indemnified Person did not intend its,
his or her inaction to be harmful or opposed to the best interests of the
Company or any of its Subsidiaries and (ii) the action or inaction did not
constitute fraud or willful misconduct by the Indemnified Person; provided, further, however, that indemnification under this
Section 16.1 will be recoverable only from the assets of the Company and not
from any assets of the Members. The Company will advance reasonable attorneys’
fees of an Indemnified Person as incurred, provided that such Indemnified Person
executes an undertaking, with appropriate security if requested by the Board of
Managers, to repay the amount so paid or reimbursed in the event that a final
non-appealable determination by a court of competent jurisdiction finds that
such Indemnified Person is not entitled to indemnification under this Article
16. The Company or any of its Subsidiaries may pay for insurance covering
liability of the Indemnified Persons for negligence in the operation of the
Company’s or any of its Subsidiaries’ affairs.

41

     (b) Indemnification
Priority. The Company hereby acknowledges that the rights to
indemnification, advancement of expenses and/or insurance provided pursuant to
this Section 16.1 may also be provided to certain Indemnified Persons by each
Waterton Affiliates and certain of each of its Affiliates (other than direct or
indirect subsidiaries of the Company) (collectively, the “Affiliate
Indemnitors”). The Company hereby agrees that, as between itself and the
Affiliate Indemnitors (i) the Company is the indemnitor of first resort with
respect to all such indemnifiable claims against such Indemnified Persons,
whether arising under this Agreement or otherwise (i.e., its obligations to such
Indemnified Persons are primary and any obligation of the Affiliate Indemnitors
to advance expenses or to provide indemnification for the same expenses or
liabilities incurred by such Indemnified Persons are secondary), (ii) the
Company will be required to advance the full amount of expenses incurred by such
Indemnified Persons and will be liable for the full amount of all expenses,
judgments, penalties, fines and amounts paid in settlement to the extent legally
permitted and as required by the terms of this Agreement (or any other agreement
between the Company and such Indemnified Persons), without regard to any rights
such Indemnified Persons may have against the Affiliate Indemnitors, and (iii)
the Company irrevocably waives, relinquishes and releases the Affiliate
Indemnitors from any and all claims against the Affiliate Indemnitors for
contribution, subrogation or any other recovery of any kind in respect thereof.
The Company agrees to indemnify the Affiliate Indemnitors directly for any
amounts that the Affiliate Indemnitors pay as indemnification or advancement on
behalf of any such Indemnified Person and for which such Indemnified Person may
be entitled to indemnification from the Company in connection with serving as a
director or officer (or equivalent titles) of the Company or its Subsidiaries.
The Company further agrees that no advancement or payment by the Affiliate
Indemnitors on behalf of any such Indemnified Person with respect to any claim
for which such Indemnified Person has sought indemnification from the Company
will affect the foregoing and the Affiliate Indemnitors will be subrogated to
the extent of such advancement or payment to all of the rights of recovery of
such Indemnified Person against the Company, and the Company will cooperate with
the Affiliate Indemnitors in pursuing such rights.

     Section 16.2 Exculpation.

     No Indemnified Person will be
liable, in damages or otherwise, to the Company, any of its Subsidiaries or to
any Member for any loss that arises out of any act performed or omitted to be
performed by it, him or her pursuant to the authority granted by this
Agreement.

42

     Section 16.3 Persons Entitled
to Indemnity. 

     Any Person who is within the
definition of “Indemnified Person” at the time of any action or inaction in
connection with the business of the Company or any of its Subsidiaries will be
entitled to the benefits of this Article 16 as an “Indemnified Person” with
respect thereto, regardless of whether such Person continues to be within the
definition of “Indemnified Person” at the time of such Indemnified Person’s
claim for indemnification or exculpation hereunder. The right to indemnification
and the advancement of expenses conferred in this Article 16 will not be
exclusive of any other right which any Person may have or hereafter acquire
under any statute, agreement, by Law, vote of the Board of Managers or
otherwise. If this Article 16 or any portion hereof will be invalidated on any
ground by any court of competent jurisdiction, then the Company will
nevertheless indemnify and hold harmless each Indemnified Person pursuant to
this Article 16 to the fullest extent permitted by any applicable portion of
this Article 16 that will not have been invalidated and to the fullest extent
permitted by applicable Law.

     Section 16.4 Procedure
Agreements. 

     The Company may enter into an
agreement with any of its officers, employees, consultants, counsel and agents,
or the Board Managers, setting forth procedures consistent with applicable Law
for implementing the indemnities provided in this Article 16.

     Section 16.5 Interested
Transactions. 

     No contract or transaction
between the Company and one or more of the Board Managers or officers, or
between the Company and any other entity in which one or more of the Board
Managers or officers are directors or officers, or have a financial interest,
will be void or voidable solely because the Board Manager or officer is present
at or participates in the meeting of the Board of Managers or committee which
authorizes the contract or transaction, provided that his, her or their votes
are not counted for such purpose.

     Section 16.6 Business
Opportunities. 

     Each employee, consultant and
service provider of the Company or any of its Subsidiaries that is party to this
Agreement will, and will cause each of his, her or its Affiliates to, bring all
investment or business opportunities to the Company of which any of the
foregoing become aware and which are related to, complementary with or
competitive with the business then conducted or proposed to be conducted by the
Company or any of its Subsidiaries. Notwithstanding the foregoing or anything at
law or in equity to the contrary, to the fullest extent permitted by Law,
neither the foregoing sentence nor the doctrine of corporate opportunity,
business opportunity, or any analogous doctrine, will apply to Waterton, any
Affiliated Fund, any Waterton Board Manager, Gryphon or any of their respective
Affiliates or Permitted Transferees (each an “Exempted Person”). The
Company and each Member renounces any interest or expectancy of the Company or
any of its Subsidiaries in, or in being offered an opportunity to participate
in, business opportunities that are from time to time presented to any Exempted
Person, including any transactions with Waterton, any Affiliated Fund or any of
their respective Affiliates. No Exempted Person who acquires knowledge of a
potential transaction, agreement, arrangement or other matter that may be an
opportunity for the Company or any of its Subsidiaries, including any
transaction with Waterton, any Affiliated Fund or any of their respective
Affiliates, will have any duty or obligation to communicate or offer such
opportunity to the Company, any of its Subsidiaries or any Member, and such
Exempted Person will not be liable to the Company, any of its Subsidiaries or to
the Members for breach of any fiduciary or other duty by reason of the fact that
such Exempted Person pursues or acquires such opportunity, or directs such
opportunity to another Person or does not communicate such opportunity or
information to the Company or any of its Subsidiaries. No amendment or repeal of
this Section 16.6 will apply to or have any effect on the liability or alleged
liability of any Exempted Person for or with respect to any opportunities of
which any such Exempted Person becomes aware prior to such amendment or repeal.
For the avoidance of doubt, the provisions of this Section 16.6 will have
independent effect with respect to, and will not be construed as being in lieu
of or otherwise limiting, any separate obligations of any Person under any
existing agreement between such Person and the Company and/or its Subsidiaries,
including any agreement related to any non-competition, non-solicitation,
confidentiality or other restrictions on the activities or operations of such
Person.

43

     Section 16.7 Reliance,
Etc.

     (a) Notwithstanding any other
provision of this Agreement, an Indemnified Person acting under this Agreement
will not be liable to the Company or to any other Indemnified Person for its,
his or her good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the duties
(including fiduciary duties) and liabilities of an Indemnified Person otherwise
existing at law or in equity, are agreed by the Company and each Member to
replace such other duties and liabilities of such Indemnified Person. No
Indemnified Person will have any fiduciary duties to the Company or any Member,
and will otherwise not have any obligations other than such obligations as
specifically provided by this Agreement.

     (b) Notwithstanding any other
provision of this Agreement or otherwise applicable law, whenever in this
Agreement an Indemnified Person is permitted or required to make a decision (i)
in its, his or her discretion or under a grant of similar authority, the
Indemnified Person will be entitled to consider only such interests and factors
as such Indemnified Person desires, including its, his or her own and its, his
or her Affiliates’ interests, and will, to the fullest extent permitted by
applicable Law, have no duty or obligation to give any consideration to any
interest of or factors affecting the Company, any Member, or any other Person,
or (ii) in its, his or her good faith or under another express standard, the
Indemnified Person will act under such express standard and will not be subject
to any other or different standards.

ARTICLE 17
REPRESENTATIONS AND COVENANTS BY THE
MEMBERS

     Each Member hereby represents and
warrants to, and agrees with, the Board of Managers, severally and not jointly
and solely on its own behalf, as follows:

     Section 17.1 Investment
Intent. 

     Such Member is acquiring such
Member’s Interest with the intent of holding the same for investment for such
Member’s own account and without the intent or a view of participating directly
or indirectly in any distribution of such Interests within the meaning of the
Securities Act or any applicable state securities laws, or otherwise
Transferring such Interests, in each case in violation of applicable law.

     Section 17.2 Securities
Regulation.

     (a) Such Member acknowledges and
agrees that such Member’s Interest is being issued and sold in reliance on the
exemption from registration under the Securities Act and exemptions contained in
applicable state securities laws, and that such Member’s Interest cannot and
will not be sold or transferred except in a transaction that is exempt under the
Securities Act and applicable state securities laws or pursuant to an effective
registration statement under the Securities Act and applicable state securities
laws.

     (b) Except as otherwise set forth
in this Agreement, such Member understands that such Member has no contractual
right for the registration under the Securities Act of such Member’s Interest
for public sale and that, unless such Member’s Interest is registered or an
exemption from registration is available, such Member’s Interests may be
required to be held indefinitely.

44

     (c) Such Member has voluntarily
acquired his, her or its Interests and was not, in the case of any employee of
the Company or any of its Subsidiaries or such employee’s permitted assigns,
induced to acquire his or her Interests by expectation of employment or
continued employment of the employee with the Company or a Subsidiary of the
Company.

     Section 17.3 Knowledge and
Experience. 

     Such Member is an “accredited
investor” as defined in Rule 501(a) under the Securities Act, and/or such Member
has such knowledge and experience in financial, tax and business matters as to
enable such Member to evaluate the merits and risks of such Member’s investment
in the Company and to make an informed investment decision with respect
thereto.

     Section 17.4 Economic
Risk. 

     Such Member is able to bear the
economic risk of such Member’s investment in such Member’s Interest for an
indefinite period of time, and such Member is aware that such Member may lose
the entire amount of such Member’s investment in the Company.

     Section 17.5 Binding
Agreement.

      Such Member has all
requisite power and authority to enter into and perform this Agreement and this
Agreement is and will remain such Member’s valid and binding agreement,
enforceable in accordance with its terms (subject, as to the enforcement of
remedies, to any applicable bankruptcy, insolvency or other Laws affecting the
enforcement of creditors rights).

     Section 17.6 Tax Position.

     The Members will not take a
position on such Member’s U.S. federal income tax return, in any claim for
refund, or in any administrative or legal proceedings that is inconsistent with
(i) this agreement, (ii) any tax return or information return filed by the
Company, or (iii) the position that Waterton is to receive an increase in the
adjusted basis of its proportionate share (based on Units) in the Company’s
assets as a result of Waterton’s purchase of Interests as set forth in the
Contribution Agreement.

     Section 17.7 Information.

     Such Member has received all
documents, books and records pertaining to an investment in the Company
requested by such Member. Such Member has had a reasonable opportunity to ask
questions of and receive answers concerning the Company, and all such questions
have been answered to such Member’s satisfaction and the determination of such
Member to acquire any Units pursuant to this Agreement has been made by such
Member independent of any such answers given or other statements made by the
Company, its Subsidiaries and their respective Affiliates and
representatives.

     Section 17.8 Tax and Other
Advice. 

     Such Member has had the
opportunity to consult with such Member’s own tax and other advisors with
respect to the consequences to such Member of the purchase, receipt or ownership
of the Units, including the tax consequences under federal, state, local, and
other income tax Laws of the United States or any other country and the possible
effects of changes in such tax Laws. Such Member acknowledges that none of the
Company, its Subsidiaries, Affiliates, successors, beneficiaries, heirs and
assigns and its and their past and present directors, officers, employees, and
agents (including, without limitation, their attorneys) makes or has made any
representations or warranties to such Member regarding the consequences to such
Member of the purchase, receipt or ownership of the Units, including the tax
consequences under federal, state, local and other tax Laws of the United States
or any other country and the possible effects of changes in such tax Laws.

     Section 17.9 Licenses and
Permits. 

     Such Member will cooperate in
providing such information, in signing such documents and in taking any other
action as may reasonably be requested by the Company in connection with
obtaining any federal, state, municipal, county, territorial, aboriginal, local
or other governmental license or permit (within or without the United States)
necessary or appropriate to operate its business or the business of any entity
in which the Company invests.

45

     Section 17.10 Indemnities.

     Such Member agrees to indemnify
and hold harmless the Company from and against all losses, damages, liabilities
and expenses (including without limitation reasonable attorney’s fees and
charges) resulting from any breach of any representation, warranty or agreement
of such Member in this Agreement or any misrepresentation by such Member in this
Agreement. 

     Section 17.11 Takeover
Proposals. 

     Such Member (other than Waterton)
(on behalf of itself and, to the extent that such Member would be responsible
for the acts of the following Persons under principles of agency law, its
directors, officers, Affiliates, shareholders, partnership, employees, agents
and members) covenants and agrees that it will not, directly or indirectly,
without the prior written consent of Waterton (which may be withheld or delayed
in the sole discretion of Waterton): (a) enter into negotiations, provide
advice, provide any form of assistance or otherwise encourage, facilitate or
make any proposal or offer for any takeover bid, amalgamation, plan of
arrangement, reorganization, recapitalization, asset sale, merger, business
combination or any similar extraordinary transaction involving the Company or
any of its Affiliates or Members that would result in a Change in Control (each,
a “Takeover Proposal”; (b) engage in any discussion or negotiations, or
enter into any agreement, commitment or understanding with any third party
(including any creditors of the Company or any Affiliates of such creditors)
with respect to any Takeover Proposal; (c) provide or arrange any equity or debt
financing to any third party considering or proposing any Takeover Proposal; or
(d) assist, advise or encourage a third party in doing any of the foregoing.

ARTICLE 18
COMPANY REPRESENTATIONS AND
COVENANTS

     In order to induce the Members to
enter into this Agreement and to make the Capital Contributions contemplated
hereby, the Company hereby represents and warrants and agrees to each Member as
follows:

     Section 18.1 Duly Formed.

     The Company is a duly formed and
validly existing limited liability company under the Act, with all necessary
power and authority under the Act to issue the Interests to be issued to the
Members hereunder.

     Section 18.2 Valid Issue.

     When the Interests are issued to
the Members as contemplated by this Agreement and the Capital Contributions
required to be made by the Members are made, the Interests issued to the Members
will be duly and validly issued and no liability for any additional capital
contributions or for any obligations of the Company will attach thereto.

ARTICLE 19 
AMENDMENTS TO AGREEMENT

     Section 19.1 Amendments.

     This Agreement may be modified or
amended by written action of the Board of Managers. The Board of Managers shall
provide a copy of any such amendment or modification of this Agreement to the
Members.

     Section 19.2 Corresponding
Amendment of Certificate. 

     The Board of Managers will cause
to be prepared and filed any amendment to the Certificate that may be required
to be filed under the Act as a consequence of any modification or amendment to
this Agreement.

46

     Section 19.3 Binding
Effect. 

     Any modification or amendment to
this Agreement pursuant to this Article 19 will be binding on the Company and
all Members.

ARTICLE 20 
GENERAL

     Section 20.1 Public
Offering; Right to Convert to Corporate Form.

     (a) If the Company, pursuant to
the decision of the Board of Managers, undertakes a Public Offering, then the
Members will cooperate with each other in good faith to restructure the Company
in advance of the Public Offering in the most tax-advantageous manner reasonably
available to enable the Affiliated Funds to receive equity interests in the
entity effecting the Public Offering in exchange for interests directly or
indirectly in Waterton. For greater clarity, the Members agree that the
restructuring steps in advance of the Public Offering may include converting the
Company from a Nevada limited liability company to a corporation organized under
the laws of Nevada or another jurisdiction, whether by merger, statutory
conversion, a tax-free contribution under Section 351 of the Code or by such
other form of transaction as may be available under applicable Law. The Members
hereby agree to cooperate in all respects to effectuate the restructuring in
advance of the Public Offering and the Public Offering, which may require the
conversion of their Units into shares of common stock or other securities in the
Company or another entity. The Board of Managers, in its sole discretion and
without the requirement for any action or approval of any Member or Member, will
have the exclusive power and authority to approve and authorize any
restructuring steps. The Members will, at the expense of the Company, as soon as
practicable thereafter, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, all instruments and documents that may be
reasonably requested by the Board of Managers to best effectuate the
restructuring of the Company while continuing in full force and effect, to the
extent consistent with such restructuring, the terms, provisions, and conditions
of this Agreement, including all rights, protections and benefits afforded to
parties to this Agreement. All Members will work together in good faith to
accomplish the restructuring in the most tax-advantageous manner reasonably
available. It is the intent of the Members that any conversion of the Company
into corporate form is part of the Member’s investment decision with respect to
the Units. Immediately prior to the restructuring, the Board of Managers will
determine the aggregate value of the Units immediately prior to the Public
Offering (the “Pre-Offering Company Value”) based on each share of common
stock’s Fair Market Value net of any underwriting discounts, fees and expenses
(the “Per Share Offering Price”).

     (b) All Members hereby agree to
take all actions in connection with a Public Offering (whether or not such
Public Offering involves a conversion of the Company as set forth in Section
20.1(a)), including refraining from dissenting to any such Public Offering,
executing all documents as may be requested by the Board of Managers and
executing any holdback, lockup or similar agreement requested by Waterton in
connection with such Public Offering. In connection with a Public Offering, the
Company will also enter into a registration agreement with Waterton and Gryphon
(if Gryphon holds not less than 20% of the Interests) which will be in a form
customary for such agreements and which will provide that (i) Waterton, the
Affiliated Funds and their respective Affiliates will be entitled to “demand”
registration rights and (ii) that each other Member will be entitled to
“piggy-back” registration rights on each such demand registration and any other
registrations of the Company in which Waterton participates, provided that such
participation must not impair the Public Offering and will also be in the
discretion of the lead underwriter.

     (c) The Company will indemnify
and hold harmless each Member from and against all losses, damages, liabilities
and expenses (including, without limitation, reasonable attorneys’ fees and
charges) resulting from any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus, offering circular, or
other document (including any related registration statement, notification, or
the like), or any amendment or supplement thereto, incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any
securities law, rule or regulation, in each case applicable to the Company in
connection with any such registration, qualification, or compliance.

47

     (d) Each Member will, to the
extent securities held by such Member are included in the securities as to which
such registration, qualification, or compliance is being effected, indemnify the
Company, each of its directors, managers, officers, partners, legal counsel, and
accountants, and each underwriter, if any, of the Company’s securities covered
by such a registration statement, and each other Member, against all claims,
losses, damages, and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, each other
such Member, and each such underwriter, for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, as such expenses are incurred, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to the
Company by such Member and stated to be specifically for use therein. A Member’s
liability at law for indemnification under this Section 20.1(d) (other than for
fraud) is expressly limited to the aggregate amount of consideration received by
such Member in connection with or pursuant to such Public Offering.

     (e) All expenses incurred by the
Company in complying with this Section 20.1, including all registration,
qualification, listing and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, fees and disbursements of not more
than one counsel for all of the Members chosen by Waterton registering
securities in any given registration, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which will
be paid in any event by the Company), will be borne by the Company.

     Section 20.2 Successors
and Assigns; Etc. 

     This Agreement will be binding
upon the executors, administrators, estates, heirs, Permitted Transferees and
other legal successors of the Members. For the avoidance of doubt, the rights
and obligations under this Agreement may be assigned and transferred, in whole
or in part, solely and exclusively as expressly permitted by this Agreement,
including in connection with any Transfer completed in compliance with Article
11 or Article 12.

     Section 20.3 Notices, Etc.

     All notices and other
communications required or permitted hereunder will be in writing and will be
deemed effectively given upon personal delivery or receipt (which may be
evidenced by a return receipt if sent by registered mail or by signature if
delivered by courier or delivery service), addressed (a) if to any Member, at
the address of such Member on file with the Company (including any e-mail
address) or at such other address (including any e-mail address) as such Member
will have furnished to the Company in writing as the address to which notices
are to be sent hereunder and (b) if to the Company or to the Board of Managers
to it at:

48

Borealis Mining Company LLC 

  611 N. Nevada Street

Carson
City, Nevada 89703Attn: Chief Executive Officer

With copies to (which shall not constitute notice):

	Waterton 
	Folio House 
	P.O. Box 800 
	Road Town, Tortola, VG1110 
	British Virgin Islands 
	Fax: (284) 494-8356/7422 
	Attention: Peter Poole, 

     Section 20.4 Area of Interest;
Abandonment of Claims. 

     No Member or former Member shall,
or shall authorize or permit its Affiliates to, directly or indirectly, acquire
any interest or right to acquire any interest in any real property, minerals,
water rights relating to real property or other real property interest (whether
fee, surface, mineral, patented, unpatented, lease, right of use, or otherwise)
that is wholly or partially within the Area of Interest, except as described in
Schedule 20.4.1. The terms and conditions set forth in Schedule 20.4 shall apply
to any acquisition or proposed acquisition with respect to property wholly or
partially within the Area of Interest. The surrender or abandonment, or proposed
surrender or abandonment, of part or all of the Properties shall also be
governed by the terms and conditions set forth in Schedule 20.4.1. “Area of
Interest” means the area encompassed by the Properties, all real property
located within the boundaries of the Properties, and all real property within
five (5) miles from the perimeter of the Properties, or any portion thereof.

     Section 20.5 Execution of
Documents; Further Assurances. 

     From time to time after the date
of this Agreement, upon the request of the Board of Managers, each Member will
perform, or cause to be performed, all such additional acts, and will execute
and deliver, or cause to be executed and delivered, all such additional
instruments and documents, as may be required to effectuate the purposes of this
Agreement. Each Member, including each Permitted Transferee, by the execution of
this Agreement or by agreeing in writing to be bound by this Agreement,
irrevocably constitutes and appoints the Board of Managers or any Person
designated by the Board of Managers to act on such Member’s behalf for purposes
of this Section 20.5 as such Member’s true and lawful attorney-in-fact with full
power and authority in such Member’s name and stead to execute, deliver, swear
to, file and record at the appropriate public offices such documents as may be
necessary or appropriate to carry out this Agreement, including:

     (a) all certificates and other
instruments (specifically including counterparts of this Agreement), and any
amendment thereof, that the Board of Managers deems appropriate to qualify or to
continue the Company as a limited liability company in any jurisdiction in which
the Company may conduct business or in which such qualification or continuation
is, in the opinion of the Board of Managers, necessary to protect the limited
liability of the Members; 

     (b) all conveyances and other
instruments that the Board of Managers deems appropriate to reflect the
dissolution of the Company; and

     (c) all amendments to this
Agreement adopted in accordance with the terms hereof and all instruments that
the Board of Managers deems appropriate to reflect a change or modification of
the Company in accordance with the terms of this Agreement.

 

49

     The appointment of each Board
Manager as such Member’s attorney-in-fact to act on its behalf for purposes of
this Section 20.5 will be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Members under this Agreement will be
relying upon the power of the Board of Managers to act as contemplated by this Agreement in any filing
and other action by him, her or it on behalf of the Company, and will survive
the bankruptcy, dissolution, death, adjudication of incompetence or insanity of
any Member giving such power and the transfer or assignment of all or any part
of such Member’s Interests; provided, however, that in the event
of a Transfer by a Member of all of its Interest, the power of attorney given by
the transferor will survive such assignment only until such time as the
transferee will have been admitted to the Company as a substituted Member and
all required documents and instruments will have been duly executed, filed, and
recorded to effect such substitution. 

     Section 20.6 Governing Law;
Nevada Law. 

     This Agreement and the
performance of the transactions contemplated hereby will be governed by and
construed in accordance with the laws of the State of Nevada, without giving
effect to any choice of law principles.

     Section 20.7 Consent to
Jurisdiction and Service of Process; Waiver of Jury Trial. 

     The parties irrevocably and
unconditionally consent to the jurisdiction and venue of the state and federal
courts located in the State of Colorado in connection with any action relating
to this Agreement and agree that service of summons, complaint or other process
in connection with any such action may be made as set forth in Section 20.3 and
that service so made will be as effective as if personally made in the State of
Colorado. Each Member irrevocably and unconditionally waives any objection to
the laying of venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding has been brought in
an inconvenient forum, and waives any motion to transfer venue from any of the
aforesaid courts. A final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding and may be enforced in
any other courts to whose jurisdiction any such Member is or may be subject, by
suit upon judgement.

     Each Member irrevocably and
unconditionally agrees to waive trial by jury in any action, proceeding, claim
or counterclaim brought by or on behalf of such Member related to or arising out
of this Agreement or the transactions contemplated hereby. 

     Section 20.8 Severability.

     If any provision of this
Agreement is determined by a court to be invalid or unenforceable, that
determination will not affect the other provisions hereof, each of which will be
construed and enforced as if the invalid or unenforceable portion were not
contained herein. Such invalidity or unenforceability will not affect any valid
and enforceable application thereof, and each such provision will be deemed to
be effective, operative, made, entered into or taken in the manner and to the
full extent permitted by Law.

     Section 20.9 Construction.

     Each Member and each other party
to or bound by this Agreement acknowledges that it has been represented and
advised by legal counsel during the negotiation, preparation, execution and
delivery of this Agreement as well as its acquisition of its Interest. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties hereto, the
principle of contra proferentum will not apply to this Agreement and no
presumption or burden of proof will arise favoring or disfavoring any party
hereto by virtue of the authorship of any of the provisions of this
Agreement.

     Section 20.10 Table of
Contents, Headings. 

     The table of contents and
headings used in this Agreement are used for administrative convenience only and
do not constitute substantive matter to be considered in construing this
Agreement.

     Section 20.11 No Third-Party
Rights. 

     Except as expressly provided in
this Agreement, including the provisions of Article 16, the provisions of this
Agreement are solely for the benefit of the Company, the Board of Managers and
the Members and no other Person, including creditors of the Company, will have any right or claim against the Company, the
Board of Managers or any Member by reason of this Agreement or any provision
hereof or be entitled to enforce any provision of this Agreement.

50

     Section 20.12 Entire
Agreement. 

     This Agreement, each Member’s
respective purchase agreement, subscription agreement or unit certificate, the
Contribution Agreement and the other agreements contemplated hereby and thereby
constitute the entire agreement of the Members and their Affiliates relating to
the Company and supersede all prior meetings, communications, representations,
negotiations, contracts or agreements (including any prior drafts thereof) with
respect to the Company, whether oral or written, none of which will be used as
evidence of the parties’ intent. In addition, each party hereto acknowledges and
agrees that all prior drafts of this Agreement contain attorney work product and
will in all respects be subject to the foregoing sentence.

     Section 20.13 Effect of Waiver
or Consent. 

     A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any Person or to
declare any Person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.

     Section 20.14 Counterparts and
Facsimile. 

     This Agreement may be executed in
multiple counterparts with the same effect as if all signing parties had signed
the same document. All counterparts will be construed together and constitute
the same instrument. This Agreement, each Member’s respective purchase
agreement, subscription agreement or unit certificate and the other agreements
contemplated hereby and thereby, and any amendments hereto or thereto, to the
extent signed and delivered by means of a facsimile machine, email message, or
other electronic means (including .pdf format) will be treated in all manner and
respects as an original agreement or instrument and will be considered to have
the same binding legal effect as if it were the original signed version thereof
delivered in person. At the request of any party hereto or to any such agreement
or instrument, each other party hereto or thereto will re-execute original forms
thereof and deliver them to all other parties. No party hereto or to any such
agreement or instrument will raise the electronic delivery of a signature or the
fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine, email, or other electronic
means as a defense to the formation or enforceability of a contract and each
such party forever waives any such defense.

     Section 20.15 Offset. 

     Whenever the Company is to make
any Distribution to a Member or otherwise pay any sum to any Member, any amounts
that such Member owes to the Company or any of its Subsidiaries or to another
Member may be offset and deducted from that sum before payment and the amount of
such sum deducted will nonetheless be treated as paid to such Member.

     Section 20.16 Adjustment of
Numbers. 

     Subject to Section 19.1 and other
applicable provisions of this Agreement, all numbers set forth herein that refer
to Unit prices or amounts will be appropriately adjusted by the Board of
Managers in good faith to reflect Unit splits, Unit dividends, dilution, the
making of or failure to make Capital Contributions, combinations of Units and
other recapitalizations affecting the subject class of equity.

     Section 20.17 Business
Days. 

     If any time period for giving
notice or taking action hereunder expires on a day which is a Saturday, Sunday,
or legal holiday in the State of Colorado, the State of New York, Toronto,
Ontario, or the jurisdiction in which the Company’s principal office is located,
the time period will automatically be extended to the Business Day
immediately following such Saturday, Sunday, or legal holiday.

51

     Section 20.18 Survival.

     This Section, Section 5.3,
Section 6.1, Section 6.2, Section 9.4, Article 16, Section 17.10, and this
Article 20 will survive and continue in full force in accordance with their
terms notwithstanding any termination of this Agreement or the dissolution of
the Company.

     Section 20.19 Force
Majeure. 

     Except for any obligation to make
Capital Contributions or other payments when due under this Agreement, the
obligations of the Board of Managers with respect to Operations and compliance
with Programs and Budgets shall be suspended to the extent and for the period of
time that performance is prevented, in whole or in part, by a Force Majeure
Event. The affected Person shall promptly give notice to all of the Members of
any Force Majeure Event and the suspension of performance, stating in the notice
in reasonable detail the nature of and the reasons for the Force Majeure Event
and its estimated duration. The affected Person shall resume performance as soon
as possible.

     Section 20.20 Designees.

     Each of the rights granted to
Waterton may, upon the request of such Member, be exercised in whole or in part
from time to time by its Affiliates and other designees.

     Section 20.21 Gender. 

     Any reference to the masculine
gender will be deemed to include the feminine and neuter genders unless the
context otherwise requires.

     Section 20.22 Use of
Trademarks, Logos. 

     Waterton or its Permitted
Transferees shall have the right to use the Company’s logos, trademarks, and
other intellectual property for Waterton’s or any of its Affiliates’ marketing
materials.

     Section 20.23 Investigations,
Criminal Matters. 

     The Company and its Subsidiaries
will keep Waterton or its Permitted Transferees fully informed and apprised of
any tax, criminal, or regulatory investigations, prosecutions or other similar
activities and of any issues, investigations or prosecutions with respect to
Environmental Compliance, and the Company and its Subsidiaries will cooperate
with Waterton or its Permitted Transferees to mitigate any adverse
consequences.

     Section 20.24 Information Rights.

     (a) Waterton and its Permitted
Transferees shall have complete access to the books and records (including tax
records) of the Company and its Subsidiaries. 

     (b) The Company will deliver, or
will cause to be delivered, to each Member (x) within 45 days after the end of
each fiscal quarter of the Company, the quarterly internally prepared unaudited
consolidated financial statements of the Company and its consolidated
Subsidiaries for such quarter and (y) within 120 days after the end of each
fiscal year of the Company, the audited annual consolidated financial statements
of the Company and its consolidated Subsidiaries for such year; in each case, at
the expense of the Company; provided that, the delivery of any such
financial statements by the Company or any of its Subsidiaries to each Member
will be deemed to satisfy the Company’s obligations to such Member hereunder.
The foregoing rights will be subject to such reasonable standards as may be
established by the Board of Managers from time to time.

     Section 20.25 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 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 Law. If, however, any such violation
inadvertently occurs, the provisions of this Agreement shall be revised and
reformed in such a way as to approximate most closely the intent of the Members
within the limits permissible by such applicable Law.

52

     Section 20.26 Outside
Business Activities of Waterton.

     (a) Each of the Members and the
Company acknowledge and affirm that Waterton and its Affiliates: (i) Gryphon,
the Company and Waterton have previously entered into that certain Senior
Secured Gold Stream Credit Agreement, dated April 18, 2012, among Gryphon, as
the borrower, the Company, as the guarantor, and Waterton, as the lender,
whereby Waterton agreed to make loans up to $15,000,000 (as amended, modified,
supplemented or restated, the “Credit Agreement”); Gryphon, the Company
and Waterton entered into certain other Credit Documents, as defined in the
Credit Agreement (the “Credit Documents”); and Waterton may from time to
time extend certain other credit facilities to the Company (collectively, such
credit facilities, together with the Credit Agreement and the Credit Documents
being the “Credit Facilities”); (ii) Gryphon, the Company and Waterton
have previously entered into that certain Gold and Silver Supply Agreement dated
April 18, 2012, whereby Waterton will acquire gold and silver from Gryphon and
the Company from time to time on the terms and conditions contained therein, and
Gryphon, the Company and Waterton may from time to time enter into other gold or
silver purchase, sale and supply agreements whereby Waterton will acquire, gold,
silver or other metals (as amended, modified, supplemented or restated from time
to time, the “Supply Agreements”); (iii) (A) have previously
participated, and will in the future participate, directly or indirectly, in
private equity, venture capital, lending, royalty, gold and silver stream, gold
and silver supply, and other direct and indirect investments in other Persons
(“Other Investments”), including Other Investments engaged in various
aspects of mining, mineral exploration, mineral development, mineral sales and
other mining activities that may, are or will be competitive with the Company’s
business or that could be suitable for the Company and its Subsidiaries, (B)
have interests in, participate with, aid and maintain seats on the board of
directors, board of managers, or similar governing bodies, of Other Investments,
and (C) may develop or become aware of business opportunities with and for Other
Investments; and (iv) may or will, as a result of or arising from the matters
referenced in clauses (i), (ii) and (iii), and, generally, as a result of or
arising from the business of Waterton and its Affiliates, have conflicts of
interest or potential conflicts of interest with the Company, with Gryphon and
with any other Member.

     (b) Subject to compliance with
the terms of this Agreement, the Members and the Company expressly (i)
acknowledge and affirm that neither Waterton nor any Affiliate thereof has any
fiduciary relationship with or duty to the Company, any Member or any Affiliate
of any Member, (ii) acknowledge and affirm that Waterton has acted solely as a
principal with respect to the Company and this Agreement and neither Waterton,
nor any of its Affiliates nor any Waterton Board Manager has acted as an
advisor, agent or fiduciary for the Company, any Member or any Affiliate
thereof, or has any fiduciary duty to the Company or any other member, (iii)
waive any such conflicts of interest or potential conflicts of interest and
agree that Waterton and its Affiliates and the Waterton Board Managers shall not
have any liability to the Company, any Member or any Affiliate therefor with
respect to such conflicts of interest or potential conflicts of interest, (iv)
acknowledge and agree that Waterton and its Affiliates and the Waterton Board
Managers will not have any duty to disclose to the Company, the Board of
Managers, any other Member or any Affiliate thereof any such business
opportunities, whether or not competitive with the Company’s business or
Gryphon’s business and whether or not the Company or Gryphon might be interested
in such business opportunity or Other Investment for itself, and (v) acknowledge
and agree that Waterton and its Affiliates and the Waterton Board Members shall
not be liable to the Company or any other Member or any Affiliate thereof for
breach of fiduciary duty or breach of any other duty relating to the Company,
its Operations or this Agreement (whether imposed by applicable Law or
otherwise), by reason of the fact that Waterton or its Affiliates or any
Waterton Board Member pursues or acquires any business opportunity, corporate opportunity or Other Investment, or
fails to present such business opportunity, corporate opportunity or Other
Investment, or information regarding the same, or takes any action with respect
to or enforces its rights or remedies under any Credit Facilities, nor shall the
Company, any Member or any Affiliate thereof make a claim or allegation related
thereto. The Members and their Affiliates also acknowledge that Waterton and its
Affiliates and the Waterton Board Managers have duties not to disclose
confidential or proprietary information of or related to the Other
Investments.

53

     (c) The Members and the Company
hereby (i) agree that (A) the terms of this Section 20.26, to the extent that
they modify or limit a duty or other obligation, if any, that Waterton or its
Affiliates or the Waterton Board Managers may have to the Company or another
Member under the Act or other applicable Law, are reasonable in form, scope and
content; and (B) the terms of this Section 20.26 shall control to the fullest
extent possible if it is in conflict with a duty, if any, that Waterton or its
Affiliates or a Waterton Board Manager may have to the Company or another
Member, with the Act, or with any other applicable Law; and (ii) expressly and
specifically waive any duty or other obligation, if any, that Waterton or its
Affiliates or the Waterton Board Managers may have to the Company or another
Member pursuant to the Act or any other applicable Law, to the extent necessary
to give full effect to the terms of this Section 20.26.

     (d)

     (i) The
Members and the Company hereby agree that (i) the Company may from time to time
employ or engage Waterton Representatives or Related Parties to provide services
and advice to the Company on a consulting basis, (ii) the Company shall pay such
Waterton Representatives or Related Parties fair market rates and compensation
as determined by the Board of Managers, which the Company may effectuate either
by direct payment or by reimbursement to Waterton, and (iii) any amounts paid to
Waterton or to a Waterton Representative or Related Party for services or advice
to the Company shall not constitute or be deemed to be a Distribution.

     (ii) The
Members and the Company hereby agree that (i) the Company may from time to time
employ or engage Gryphon Representatives or Related Parties to provide services
and advice to the Company on a consulting basis, subject to the prior approval
of the Board of Managers with respect to the identity and time of engagement of
such Gryphon Representatives or Related Parties, (ii) the Company shall pay such
Gryphon Representatives or Related Parties fair market rates and compensation as
determined by the Board of Managers, which the Company may effectuate either by
direct payment or by reimbursement to Gryphon, and (iii) any amounts paid to
Gryphon or to a Gryphon Representative or Related Party for services or advice
to the Company shall not constitute or be deemed to be a Distribution.

     (e) The Members and the Company
hereby agree that (i) the Company shall make all payments under the Credit
Facilities as and when the same are due and payable in accordance with the terms
thereof, whether for principal, interest, fees, expenses or otherwise, (ii) each
of Gryphon, the Company and Waterton shall make payments as and when due under
the Supply Agreements in accordance with the terms thereof, (iii) any amounts
paid to Waterton or its Affiliates under the Credit Facilities or any Supply
Agreement shall not constitute or be deemed to be a Distribution, and (iv) any
amounts paid to Gryphon or the Company under any Supply Agreement shall not
constitute or be deemed to be a Capital Contribution.

     (f) The Members and the Company
acknowledge, affirm and agree that (i) the execution and delivery of this
Agreement is of material benefit to the Company and the Members, and that they
would not be willing to execute and deliver this Agreement, and make Capital
Contributions to the Company, without the benefit of this Section 20.26, and (ii) they have
reviewed and understand the provisions of Section 18-1101(b) of the Act.

54

     Section 20.27 Termination of
Agreement. 

     A Member will have no rights
under this Agreement when that Member no longer holds any Interest in the
Company. This Agreement will be terminated: (a) if one sole Member holds all the
Interests in the Company, upon (i) the election of such sole Member in writing
to dissolve the Company, and (ii) the subsequent dissolution of the Company in
accordance with applicable Law; (b) upon dissolution of the Company in
accordance with this Agreement and applicable Law; (c) upon written agreement of
all Members; or (d) following a Public Offering.

[Remainder of the page intentionally left blank]

55

     IN WITNESS WHEREOF, the
undersigned, intending to be legally bound hereby, have duly executed this
amended and restated limited liability company agreement as of the date and year
first above written.

	 	BOREALIS MINING COMPANY LLC
  
	 	 	  
	 	 	  
	 	 	  
	 	By: 	
	 	 	Name: James T. O’Neil Jr. 
	 	 	Title: Manager 
	 	 	  
	 	 	  
	 	 	  
	 	BOREALIS HOLDINGS LLC 
	 	 	  
	 	 	  
	 	 	  
	 	By: 	
	 	 	Name: Richard J. Wells 
	 	 	Title: Manager 
	 	 	  
	 	 	  
	 	 	  
	 	GRYPHON GOLD CORPORATION

	 	 	  
	 	 	  
	 	 	  
	 	By: 	
	 	 	Name: James T. O’Neil Jr. 
	 	 	Title: President and CEO 

[Signature Page -- LLC Agreement]

EXHIBIT A

FORM OF JOINDER

     This JOINDER (this
“Joinder”) to the Limited Liability Company Agreement, dated as of o, by
and among o, a limited liability company (the “Company”), and the Members
of the Company from time to time party thereto (the “Agreement”), is made
and entered into as of o by and between the Company and o (the “New
Member”). Capitalized terms used but not otherwise defined herein shall have
the meanings set forth in the Agreement.

     WHEREAS, the New Member has
acquired certain Class A Units (“New Member Units”), and the Agreement
and the Company require the New Member, as a holder of such [Class A] Units, to
become a party to the Agreement, and the New Member agrees to do so in
accordance with the terms hereof.

     NOW, THEREFORE, in consideration
of the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Joinder hereby agree as follows:

     1. Agreement to be Bound.
The New Member hereby agrees that upon execution of this Joinder, the New Member
shall become a party to the Agreement and shall be fully bound by, and subject
to, all of the covenants, terms and conditions of the Agreement as though an
original party thereto and shall be deemed a Member for all purposes thereof. In
addition, the New Member hereby agrees that all New Member Units shall be deemed
Units for all purposes of the Agreement.

     2. Notices. For purposes
of Section 19.3 of the Agreement, all notices, demands or other communications
to the New Member shall be directed to:

	 	o 	  
	 	o 	  
	 	o 	  
	 	Telephone: 	o 
	 	Facsimile: 	o 
	 	Email: o 	  

     3. Successors and Assigns. Except
as otherwise provided in the Agreement, this Joinder shall bind and inure to the
benefit of and be enforceable by the Members, the Company and its successors and
permitted assigns, and the New Member and any subsequent holders of New Member
Units and the respective successors and permitted assigns of each of them, so
long as they hold New Member Units.

     4. Counterparts. This Joinder may
be executed in multiple counterparts, each of which shall be an original and all
of which taken together shall constitute one and the same agreement.

     5. Governing Law; Jurisdiction.
The Act shall govern all issues and questions concerning the relative rights of
the Company and the holders of Units, including the New Member. All other issues
and questions concerning the construction, validity, interpretation and
enforceability of the Agreement, including this Joinder, and the exhibits and schedules thereto
shall be governed by, and construed in accordance with, the laws of the State of
Nevada, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Nevada or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Nevada. The parties hereto hereby irrevocably and unconditionally submit to the
exclusive jurisdiction of any state or federal court sitting in the State of
Colorado over any suit, action or proceeding arising out of or relating to this
Joinder. The parties hereby agree that service of any process, summons, notice
or document by United States registered mail addressed to any such party shall
be effective service of process for any action, suit or proceeding brought
against a party in any such court. The parties hereto hereby irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. The parties hereto agree that a final judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon any party and may be enforced in any other courts to whose
jurisdiction any party is or may be subject, by suit upon such judgment. In the
event of a direct conflict between the provisions of this Joinder and any
provision of the Agreement, the applicable provision of the Agreement shall
control.

A - 1

     6. WAIVER OF JURY TRIAL. EACH OF
THE PARTIES HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
JOINDER OR THE AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR
WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO OR THERETO.

     7. Business Days. If any time
period for giving notice or taking action hereunder expires on a day which is
not a Business Day, the time period shall automatically be extended to the
Business Day immediately following such day.

     8. Descriptive Headings;
Construction. The descriptive headings of this Joinder are inserted for
convenience only and do not constitute a part of this Joinder. The parties to
this Joinder have participated jointly in the negotiation and drafting of this
Joinder. In the event an ambiguity or question of intent or interpretation
arises, this Joinder shall be construed as if drafted jointly by the parties and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Joinder. The word
“including” means including without limitation.

     9. Delivery by Facsimile or
Email. This Joinder, and each other agreement or instrument entered into in
connection herewith, and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine or email with scan or facsimile
attachment, shall be treated in all manner and respects as an original agreement
or instrument and shall be considered to have the same binding legal effect as
if it were the original signed version thereof delivered in person. At the
request of either party hereto or to any such agreement or instrument, the other
party hereto or thereto shall re execute original forms thereof and deliver them
to the other party. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine or email to deliver a signature or the fact
that any signature or agreement or instrument was transmitted or communicated
through the use of a facsimile machine or email as a defense to the formation or
enforceability of a contract, and each such party forever waives any such
defense.

[END OF PAGE] 
[SIGNATURE PAGE FOLLOWS] 

A - 2

IN WITNESS WHEREOF, the parties hereto have executed this
Joinder as of the date first above written.

	 	o LLC 
	 	 	  
	 	 By: 	
	 	 Name: 	
	 	 Title: 	
	 	 	  
	 	[NEW MEMBER] 
	 	 	  
	 	 By: 	
	 	 Name: 	
	 	 Title: 	

A - 3

Schedule 3.1

UNIT HOLDERS OF THE COMPANY

Schedule 3.1, as updated from time to time by the Board
of Managers, is on file with the Company.

As of the Effective Date, information with respect to the
Members is as follows:

	Member 
	Class A Units 
	Interest 
	Initial Capital
      
Contribution 
	Borealis Holdings LLC 	6,000,000 	60% 	  
	Gryphon Gold 
Corporation 	
4,000,000 	
40% 	

3.1 - 1

Schedule 7.1

BOARD OF MANAGERS

	1) 	
      Number, Appointment. Upon the effectiveness of
      this Agreement, the authorized number of managers on the Board of Managers
      (each, a “Board Manager”) will initially be five (5) Board
      Managers, and will consist of the following:

	 	a) 	
      Waterton Managers.

     (i)
Waterton shall initially be entitled to designate three (3) Board Managers, who
will at first be Richard J. Wells, Peter Ingram and Michael Woloschuk (the
“Waterton Board Managers”).

     (ii) If
for any reason Waterton holds less than forty percent (40%) but more than
twenty-five percent (25%) of the outstanding Class A Units, Waterton shall have
the right to designate two (2) Board Managers, and one of the three (3) initial
Waterton Board Managers will be deemed immediately to have resigned and been
removed from the Board of Managers, and the number of Board Managers shall be
decreased by one (1); provided that Waterton shall designate which Board
Manager is so removed.

     (iii) If
for any reason Waterton holds less than twenty-five percent (25%) but more than
ten percent (10%) of the outstanding Class A Units, Waterton shall have the
right to designate one (1) Board Manager, and one of the two (2) Waterton Board
Managers will be deemed immediately to have resigned and been removed from the
Board of Managers, and the number of Board Managers shall be decreased by one
(1); provided that Waterton shall designate which Board Manager is so
removed.

     (iv) If
for any reason Waterton holds less than ten percent (10%) of the outstanding
Class A Units, Waterton shall not be entitled to designate a Board Manager, and
any Waterton Board Managers will be deemed immediately to have resigned and been
removed from the Board of Managers, and the number of Board Managers shall be
decreased by one (1).

	 	b) 	
      Gryphon Board Managers.

	 	 	 	 
	 		(i) 	
      Except as provided by Paragraphs (1)(b)(ii) – (1)(b)(iv)
      of this Schedule 7.1 or as otherwise set forth in this Agreement, Gryphon
      shall be entitled to designate two (2) Board Managers, who will at first
      be James T. O’Neil and William Goodhard (the “Gryphon Board
      Managers”).

	 	 	 	 
	 		(ii) 	
      If for any reason Gryphon holds less than twenty-five
      percent (25%) but more than ten percent (10%) of the outstanding Class A
      Units, Gryphon shall have the right to designate one (1) Board Manager,
      and one of the two (2) initial Gryphon Board Managers will be deemed
      immediately to have resigned and been removed from the Board of Managers,
      and the number of Board Managers shall be decreased by one (1);
      provided that Gryphon shall designate which Board Manager is so
      removed.

	 	 	 	 
	 		(iii) 	
      If for any reason Gryphon holds less than ten percent
      (10%) of the outstanding Class A Units, Gryphon shall not be entitled to
      designate a Board Manager, and any Gryphon Board Managers will be deemed
      immediately to have resigned and been removed from the Board of
Managers, and the number of Board Managers shall be decreased by one (1).

7.1 - 1

	 	c) 	
      Growth Board Managers. The number of Board
      Managers after the date hereof may be increased by the Board of Managers,
      provided that Waterton or its Permitted Transferee shall have the
      right to, in connection with and as a condition to one or more bona fide
      outside equity financings or bona fide business acquisitions, increase the
      size of the Board by adding additional Board Managers (the “Growth
      Board Managers”). Waterton or its Permitted Transferee shall be
      entitled to designate the Growth Board Managers.

	 	 	 
	 	d) 	
      Majority of Board. Notwithstanding anything to the
      contrary in this Schedule 7.1, Waterton or its Permitted Transferee shall
      be entitled, for as long they hold with their Permitted Transferees more
      than fifty percent (50%) of the outstanding Units, to designate not less
      than a majority of the Board Managers.

	2) 	
      Tenure. Except as provided by Law or by this
      Agreement, each Board Manager will hold office until he or she sooner dies
      or resigns, or is removed upon delivery of a written notice of removal to
      the Company by the Member or Members that designated such Board Manager
      pursuant to Paragraphs (1)(a), (1)(b) and (1)(c) above (with appropriate
      consents obtained as applicable) or if such Board Manager being removed
      was appointed by a vote of the Board of Managers, then by the Board of
      Managers (with appropriate consents obtained as applicable). A Manager may
      only be removed from the Board of Managers, with or without cause, by the
      Member or Members that designated such Board Manager.

	 	 
	3) 	
      Vacancies. Any vacancy on the Board of Managers
      may be filled only by the Member, Members or Board of Managers who have
      the right to designate him or her in accordance with this Schedule 7.1.
      The Board of Managers will have and may exercise all their powers
      notwithstanding the existence of one or more vacancies in their number,
      subject to any requirements of Law or of this Agreement as to the number
      of Board Managers required for a quorum or for any vote or other
      actions.

	 	 
	4) 	
      Regular Meetings. Regular meetings of the Board of
      Managers will be held with notice on at least a quarterly basis within or
      without the State of Nevada and at such other times as the Board of
      Managers may from time to time determine. It is agreed that more frequent
      meetings will be held in the first year of this Agreement.

	 	 
	5) 	
      Special Meetings. Special meetings of the Board of
      Managers may be held at any time and at any place within or without the
      State of Nevada designated in the notice of the meeting, when called by
      the Chair of the Board of Managers or the President, reasonable notice
      thereof being given to each Board Manager by the Secretary or by the Chair
      of the Board, if any, the President or any one of the Board Managers
      calling the meeting.

	 	 
	6) 	
      Notice. It will be reasonable and sufficient
      notice to a Board Manager to send notice by overnight delivery, e-mail or
      by facsimile at least five (5) days before the meeting addressed to such
      Board Manager at such Board Manager’s usual or last known business or
      residential address or to give notice to such Board Manager in person or
      by telephone at least two days before the meeting. Any notice shall,
      wherever practical, provide reasonable details regarding the matters to be
      voted on during such meeting. Notice of a meeting need not be given to any
      Board Manager if a written waiver of notice, executed by such Board
      Manager before or after the meeting, is filed with the records of the
      meeting, or to any Board Manager who attends the meeting without
      protesting prior thereto or at its commencement the lack
of notice to such Board Manager. Notice of a meeting may be waived by Board
Managers constituting a Quorum or, as applicable, an Adjusted Quorum.

7.1 - 2

 

	7) 	
      Quorum. Except as may be otherwise required by
      Law, at any meeting of the Board of Managers a majority of the Board
      Managers then in office will constitute a quorum, provided that
      such quorum must include at least one Board Manager appointed by Waterton
      or its Permitted Transferee and one Board Manager appointed by Gryphon
      (“Quorum”). In the event a Waterton or a Gryphon designee fails to
      attend a duly called meeting of the Board of Managers, leaving the meeting
      without a Quorum, a simple majority of Board Managers will constitute a
      quorum for the next duly called meeting of the Board of Managers
      (“Adjusted Quorum”). Any such meeting may be adjourned from time to
      time by a majority of the votes cast upon the question, whether or not a
      Quorum or, as applicable, an Adjusted Quorum, is present, and the meeting
      may be held as adjourned without further notice.

	 	 
	8) 	
      Action by Vote.

	 	a) 	
      Except as may be otherwise required by Law, when a Quorum
      or, as applicable, an Adjusted Quorum, is present at any meeting the vote
      of a majority of the Board Managers will be the act of the Board of
      Managers.

	 	 	 
	 	b) 	
      At any time that Gryphon owns not less than forty percent
      (40%) of the outstanding Class A Units and is not a Delinquent Member, the
      following actions, in addition to requiring a vote of a majority of the
      Board Managers present at any such meeting, shall require the affirmative
      vote of the Waterton Board Managers and the Gryphon Board Managers voting
      at any such meeting (subject to the presence of a Quorum, or, as
      applicable, an Adjusted Quorum):

	 	
      i. 
	
      Any voluntary bankruptcy, liquidation, dissolution or
      winding up of the Company (including the appointment of a liquidator with
      respect thereto);

	 	
       
	 
	 	
      ii. 
	
      Any grant, sale or assignment of a Royalty with respect
      to the Owned Property or any portion thereof;

	 	
       
	 
	 	
      iii. 
	
      Any issuance of Units to one or more third parties in
      connection with any capital raise for amounts in excess of $5,000,00;
      and

	 	
       
	 
	 	
      iv. 
	
      Any borrowing of money by the Company in amounts in
      excess of $20,000,000.

	9) 	
      Proxies. A Board Manager may vote at a meeting of
      the Board of Managers or any committee thereof either in person or by
      proxy executed in writing by such Board Manager. Proxies for use at any
      meeting of the Board of Managers or any committee thereof or in connection
      with the taking of any action by written consent will be filed with the
      Board of Managers, before or at the time of the meeting or execution of
      the written consent as the case may be.

	 	 
	10) 	
      Action Without a Meeting. Any action required or
      permitted to be taken at any meeting of the Board of Managers may be taken
      without a meeting so long as notice of such action is provided to each
      Board Manager and the majority of the Board of Managers provides consent
      in writing or by electronic communication and such writing or writings are
      filed with the records of the meetings of the Board of Managers. Such
      consent will be treated for all purposes as the act of the Board of
      Managers.

7.1 - 3

	11) 	
      Participation in Meetings by Conference Telephone.
      Board Managers may participate in a meeting of the Board of Managers by
      means of conference telephone or similar communications equipment by means
      of which all persons participating in the meeting can hear each other or
      by any other means permitted by Law. Such participation will constitute
      presence in person at such meeting.

	 	 
	12) 	
      Compensation. Each Board Manager will be
      reimbursed for such Board Manager’s reasonable out-of-pocket expenses
      incurred in the performance of such Board Manager’s duties as a Board
      Manager. Nothing contained in this Paragraph 12 of Schedule 7.1 will be
      construed to preclude any Board Manager from serving the Company in any
      other capacity and receiving reasonable compensation therefor.

	 	 
	13) 	
      Committees. The Board of Managers may, by vote of
      a majority of the whole board, (a) designate, change the membership of, or
      terminate the existence of any committee or committees, (b) designate one
      or more Board Managers as alternate members of any such committee who may
      replace any absent or disqualified member at any meeting of the committee
      and (c) determine the extent to which each such committee will have and
      may exercise the powers of the Board of Managers in the management of the
      business and affairs of the Company, excepting, however, such powers which
      by Law or by this Agreement they are prohibited from so delegating. For so
      long as Gryphon is entitled to elect at least one Gryphon Board Manager,
      each committee shall include at least one Gryphon Board Manager. For so
      long as any Waterton Group Member is entitled to elect at least one
      Waterton Board Manager, each committee shall include at least one Waterton
      Board Manager. In the absence or disqualification of any member of such
      committee and his or her alternate, if any, the member or members thereof
      present at any meeting and not disqualified from voting, whether or not
      constituting a quorum, may unanimously appoint another Board Manager to
      act at the meeting in the place of any such absent or disqualified member.
      Committees shall initially include an Audit Committee. Except as the Board
      of Managers may otherwise determine, any committee may make rules for the
      conduct of its business, but unless otherwise provided by the Board of
      Managers or such rules, its business will be conducted as nearly as may be
      in the same manner as is provided by this Agreement for the conduct of
      business by the Board of Managers. Each committee will keep regular
      minutes of its meetings and report the same to the Board of Managers upon
      request.

	 	 
	14) 	
      Chair of the Board of Managers. Subject to Article
      7 of the Agreement, the Chair of the Board of Managers, if any, will have
      such duties and powers as will be designated from time to time by the
      Board of Managers. Unless the Board of Managers otherwise specifies, the
      Chair of the Board of Managers, or if there is none the President, will
      preside, or designate the person who will preside, at all meetings of
      Members and of the Board of Managers. For so long as Waterton or a
      Waterton Group Member shall own more than twenty-five percent (25%) of the
      outstanding Class A Units, a Waterton Board Manager shall serve as the
      Chair of the Board of Managers.

	 	 
	15) 	
      Subsidiaries. Board of manager or board of
      director representation on any direct or indirect Subsidiaries of the
      Company shall be on substantially the same basis as provided
  herein.

7.1 - 4

Schedule 8.1

OFFICERS

	1) 	
      Election. The officers may be elected by the Board
      of Managers at any time. At any time or from time to time the Board
      Managers may delegate to any officer their power to elect or appoint any
      other officer or any agents.

	 	 
	2) 	
      Tenure. Each officer will hold office until his or
      her respective successor is chosen and qualified unless a shorter period
      will have been specified by the terms of his or her election or
      appointment, or in each case until he or she sooner dies, resigns, is
      removed or becomes disqualified. Each agent will retain his or her
      authority at the pleasure of the Board of Managers, or the officer by whom
      he or she was appointed or by the officer who then holds agent appointive
      power.

	 	 
	3) 	
      President and Vice President. Unless the Board of
      Managers otherwise specifies, the President will be the chief executive
      officer and will have direct charge of all business operations of the
      Company and, subject to the control of the Board of Managers, will have
      general charge and supervision of the business of the Company. Any Vice
      Presidents will have duties as will be designated from time to time by the
      Board of Managers, by the Chair of the Board of Managers or the
      President.

	 	 
	4) 	
      Treasurer and Assistant Treasurers. Unless the
      Board of Managers otherwise specifies, the Treasurer (or if no Treasurer
      is elected, the President) will be the chief financial officer of the
      Company and will be in charge of its funds and valuable papers, and will
      have such other duties and powers as may be designated from time to time
      by the Board of Managers, the Chair of the Board of Managers, or the
      President. If no Controller is elected, the Treasurer (or if no Treasurer
      is elected, the President) will, unless the Board of Managers otherwise
      specifies, also have the duties and powers of the Controller. Any
      Assistant Treasurers will have such duties and powers as will be
      designated from time to time by the Board of Managers, the Chair of the
      Board of Managers, the President or the Treasurer.

	 	 
	5) 	
      Controller and Assistant Controllers. If a
      Controller is elected, the Controller will, unless the Board of Managers
      otherwise specifies, be the chief accounting officer of the Company and be
      in charge of its books of account and accounting records, and of its
      accounting procedures. The Controller will have such other duties and
      powers as may be designated from time to time by the Board of Managers,
      the Chair of the Board of Managers, the President or the Treasurer. Any
      Assistant Controller will have such duties and powers as will be
      designated from time to time by the Board of Managers, the Chair of the
      Board of Managers, the President, the Treasurer or the
  Controller.

	 	 
	6) 	
      Secretary and Assistant Secretaries. The Secretary
      will record all proceedings of the Members and the Board of Managers in a
      book or series of books to be kept therefor and will file therein all
      actions by written consent of the Board of Managers. In the absence of the
      Secretary from any meeting, an Assistant Secretary, or if no Assistant
      Secretary is present, a temporary secretary chosen at the meeting, will
      record the proceedings thereof. The Secretary will keep or cause to be
      kept records, which will contain the names and record addresses of all
      Members. The Secretary will have such other duties and powers as may from
      time to time be designated by the Board of Managers, the Chair of the
      Board of Managers or the President. Any Assistant Secretaries will have
      such duties and powers as will be designated from time to time by the
      Board of Managers, the Chair of the Board of Managers, the President or
      the Secretary.

8.1 - 1

	7) 	
      Vacancies. If the office of any officer becomes
      vacant, any person or body empowered to elect or appoint that officer may
      choose a successor. Each such successor will hold office for the unexpired
      term, and until his or her successor is chosen and qualified or in each
      case until he or she sooner dies, resigns, is removed or becomes
      disqualified.

	 	 
	8) 	
      Resignation and Removal. The Board of Managers may
      at any time remove any officer either with or without cause. The Board of
      Managers may at any time terminate or modify the authority of any agent.
      Any officer may resign at any time by delivering his or her resignation in
      writing to the Chair of the Board of Managers, the President or the
      Secretary or to a meeting of the Board of Managers. Such resignation will
      be effective upon receipt unless specified to be effective at some other
      time, and without in either case the necessity of its being accepted
      unless the resignation will so state.

8.1 - 2

Schedule 14.1.1

PROGRAMS AND BUDGETS

PROGRAMS AND BUDGETS; ACCOUNTING AND REPORTING

     1) Operations Pursuant to
Programs and Budgets. 

     As set forth in Section 14.1 of
the Agreement, Operations shall be conducted, expenses shall be incurred, and
Assets shall be acquired consistent with Programs and Budgets duly adopted by
the Board of Managers. The Program and Budget shall set forth a schedule of
anticipated Capital Contributions for the period covered by such Program and
Budget. The Members shall make their Capital Contributions as set forth in the
Program and Budget in accordance with this Agreement, and any Member failing to
make such Capital Contribution shall be subject to the provisions of Section
3.7.

     2) Presentation of Proposed
Programs and Budgets. 

     Not later than November 1 of each
calendar year, the Board of Managers shall designate a Committee of the Board of
Managers to prepare a proposed Program and Budget for the succeeding calendar
year or such longer period approved by the Board of Managers, and submit the
proposed Program and Budget for such calendar year or other period to the Board
of Managers for its review and approval. The proposed Program and Budget shall
be accompanied by a notice of the date and time of the meeting of the Board of
Managers to be held to consider the proposed Program and Budget, which date
shall not be less than twenty (20) days after the submission of the proposed
Program and Budget to the Board of Managers.

     3) Approval of Proposed
Programs and Budgets. 

     On or before December 15 of each
calendar year at a meeting of the Board of Managers, the Board of Managers shall
vote on and adopt a Program and Budget. If the Board of Managers does not
approve the proposed Program and Budget, then the Board of Managers shall call
another meeting to be held within ten (10) days after the first meeting to
consider the Program and Budget and to vote on a revised Program and Budget.
During such ten (10) day period, the Board of Managers shall work in good faith
to develop a revised Program and Budget that can be approved by the Board of
Managers. At the subsequent meeting to again vote on the Program and Budget
(taking into account any revisions proposed during the revision period), the
Board of Managers shall vote to either accept or reject the revised Program and
Budget.

     4) Amendments. 

     The Board of Managers may propose
and adopt amendments (“Amendments”) to any currently approved Program and
Budget from time to time before incurring costs under the Amendment. 

     5) Deadlock on Proposed
Programs and Budgets. 

     If the Board of Managers fails to
approve a Program and Budget by the beginning of the period to which the
proposed Program and Budget applies, subject to the contrary direction of the
Board of Managers and to the receipt of necessary funds, the Board of Managers
shall continue Operations (a) if an initial Program and Budget has not been
adopted, at levels sufficient to maintain the then current Operations and
Properties, and (b) if an initial Program and Budget has been adopted, at levels
substantially comparable with the last adopted Program and Budget. The Members
shall continue to make Capital Contributions in accordance with the Interests
applicable to the last adopted Program and Budget in response to Capital Calls
from the Board of Managers to fund such Operations during any period in which a
Program and Budget has not been adopted.

     6) Budget Overruns; Program
Changes. 

     The Board of Managers shall
immediately provide notice to the Members of any material departure from an
adopted Program and Budget. Budget overruns shall be considered costs and expenses of the Company,
and shall be funded by the Members making additional Capital Contributions to
the Company in proportion to their respective Interests.

14.1.1 - 1

     7) Emergency or Unexpected
Expenditures. 

     In case of an emergency, the
Board of Managers may take any reasonable action it deems necessary to protect
life, limb or property, to protect the Assets or to comply with Laws. The Board
of Managers may also make reasonable expenditures for unexpected events that are
beyond its reasonable control. The Board of Managers shall promptly provide
notice to the Members of the emergency or unexpected expenditure, and shall be
reimbursed for all resulting costs by the Company, which costs shall be funded
by the Members making additional Capital Contributions to the Company in
proportion to their respective Interests at the time the emergency or unexpected
expenditures are incurred.

     8) Monthly Reports. 

     The Board of Managers shall
promptly submit to the Members the following reports:

     (i)
monthly statements of account reflecting in reasonable detail the charges and
credits for the Company during the preceding month;

     (ii)
monthly progress reports that include statements of expenditures and comparisons
of such expenditures to the adopted Budget; 

     (iii)
periodic summaries of data acquired by or on behalf of the Company; 

     (iv)
copies of any reports prepared by or on behalf of the Company concerning
Operations; 

     (v) a
detailed final report within 30 days after completion of each Program and Budget
(or such other period of time established by the Board of Managers), which
report shall include comparisons between actual and budgeted expenditures and
comparisons between the objectives and results of Programs; and 

     (vi) such
other reports and such other informationas the Board of Managers may reasonably
request. 

     9) Inspection Rights. 

     The Company shall (a) provide to
the Members, accountants, lawyers, consultants, advisors and other
representatives of each Member, access to, and the right to inspect and copy all
maps, drill logs, core tests, reports, surveys, assays, analyses, production
reports, operations, technical, accounting and financial records, and other
information in the possession or control of the Company pertaining to the
Company or the Operations, and (b) at the sole risk of the requesting Member,
and subject to the health and safety requirements of applicable Laws and the
Company’s reasonable safety policies and procedures, permit the Members,
accountants, lawyers, consultants, advisors and other representatives of each
Member to inspect the Assets and Operations. The requesting Member shall use
commercially reasonable efforts to prevent any such inspections from
unreasonably interfering with Operations or the other business and operations of
the Company. The Company shall pay the reasonable costs and expenses in
connection with one (1) annual site visit by a Member per year.

14.1.1 - 2

Schedule 14.1.2

INITIAL BUDGET

[see attached]

14.1.2 - 1

Schedule 20.4.1

AREA OF MUTUAL INTEREST; ABANDONMENT

     1) Acquisitions Within
Area of Interest.

     (a)
General. Except as described in this Schedule 20.4.1, no Member or former
Member shall, or shall authorize or permit its Affiliates to, directly or
indirectly, acquire any interest or right to acquire any interest in any real
property, minerals, water rights relating to real property or other real
property interest (whether fee, surface, mineral, patented, unpatented, lease,
right of use, or otherwise) that is wholly or partially within the Area of
Interest (collectively, “Covered Real Property”), either directly or
indirectly, alone, or as a member, partner, stockholder or other investor in any
Person, at any time until the earlier of (i) the termination of the Company and
(ii) the date that is sixty (60) months after the date that such Person no
longer is a Member in the Company for any reason. In addition to any other
remedies provided by this Agreement and applicable Law, each Member agrees that
the Company (or any Member, on behalf of the Company), may enforce this Schedule
20.4.1 through such legal or equitable remedies, including an injunction, as a
court of competent jurisdiction shall allow without the necessity of proving
actual damages or bad faith, and each Member waives, and shall cause its
Affiliates to waive, any claim or defense that the Company (or any remaining
Member, on behalf of the Company) has an adequate remedy at law and any
requirement for the securing or posting of any bond in connection with such
equitable remedy.

     (b)
Notice to Other Member. Within ten (10) Business Days after the
acquisition by any Member (the “Acquiring Member”) or any Affiliate of
the Acquiring Member of any Covered Real Property (excluding Covered Real
Property acquired by or on behalf of the Company under a Program), the Acquiring
Member shall provide notice to the other Member of such acquisition. The
Acquiring Member’s notice shall describe in detail the terms of the acquisition
(including the associated costs), the Covered Real Property subject to the
acquisition, whether or not the Acquiring Member believes the acquisition of the
Covered Real Property by the Company is in its best interests, and the reasons
for its conclusions. In addition to the notice, the Acquiring Member shall make
any and all information concerning the Covered Real Property and the terms of
the acquisition available for inspection by the other Member.

     (c)
Option Exercised. If, within sixty (60) days after receiving the
Acquiring Member’s notice, the other Member provides notice to the Acquiring
Member that it elects to participate in the Covered Real Property, the Acquiring
Member shall, or shall cause its Affiliate to, convey to the Company (or to the
other Member or another entity as mutually agreed by the Members), by special
warranty deed, its entire interest or right to acquire the Covered Real Property
(or if to the other Member, a proportionate undivided interest in the Covered
Real Property based on the Interests of the Members), free and clear of all
Encumbrances arising by, through or under the Acquiring Member and its
Affiliates, other than those to which both Members have agreed. If conveyed to
the Company, the Covered Real Property shall become a part of the Properties for
all purposes of this Agreement immediately upon the notice of such other
Member’s election to participate. Such other Member shall promptly pay to the
Acquiring Member its proportionate share based on Interests of the Acquiring
Member’s and its Affiliates’ actual out-of-pocket acquisition costs.

     (d)
Option Not Exercised. If the other Member does not give notice of its
election to participate within the sixty (60) day period in clause (c), neither
such other Member nor the Company shall have any interest in the
Covered Real Property, and the Covered Real Property shall not be a part of the
Properties or otherwise be subject to this Agreement.

20.4.2 - 1

2) Surrender or Abandonment of
Property. 

     Either Member may request that
the Company surrender or abandon part or all of the Properties. If the Board of
Managers does not authorize such surrender or abandonment after such a request,
or authorizes such surrender or abandonment over the objection of a Member,
subject to the terms of any Company indebtedness or other contractual or legal
restrictions binding on the Company, the Member that desires to retain such
Properties shall be distributed such Properties without cost to such Member by
special warranty deed, free and clear of all liens and encumbrances created by,
through or under the Member that desires for such Properties to be surrendered
or abandoned (but subject to any liens and encumbrances previously created
thereon by the Company or existing at the time such Properties were acquired by
the Company), which Properties the Members agree shall be assigned an agreed
fair market value as of the time of distribution of zero dollars. The Member
that desires to abandon or surrender such Properties shall remain liable to
reimburse the acquiring Member and its Indemnified Member Parties for its share
(determined by Interests as of the date of such distribution) of any adverse
consequences with respect to such Properties, including Continuing Obligations,
Environmental Liabilities and Environmental Compliance, whether accruing before
or after the date of such distribution, arising out of activities before the
date of such distribution.

20.4.2 - 2

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