8-K/A

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 8-K/A

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

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 25, 2006

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

                                  NEWGOLD, INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

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


          DELAWARE                      0-20722                  16-1400479
(STATE OR OTHER JURISDICTION    (COMMISSION FILE NUMBER)       (IRS EMPLOYER
     OF INCORPORATION)                                       IDENTIFICATION NO.)


       400 CAPITOL MALL, SUITE 900
             SACRAMENTO, CA                                          95814
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                           (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (916) 449-3913

                                      SAME
         (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)

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

Check the appropriate box below if the Form 8-K/A filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

|_|  Written communications pursuant to Rule 425 under the Securities Act (17
     CFR 230.425)

|_|  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

|_|  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

|_|  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))

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ITEM 9.01     FINANCIAL STATEMENTS AND EXHIBITS

              Exhibits.

              4.1    Convertible Debenture.
              4.2.1  Form of Warrant - $.20 exercise price.
              4.2.2  Form of Warrant - $.30 exercise price.
              10.1   Securities Purchase Agreement, dated January 27, 2006, by
                     and among Newgold and the investor named therein.
              10.2   Registration Rights Agreement, dated January 27, 2006, by
                     and among Newgold and the investor named therein
              10.3*  Joint Venture Agreement dated January 25, 2006 between
                     Newgold, Inc. and ASDi, LLC.
              10.4*  Crescent Red Caps LLC - Operating Agreement dated February
                     9, 2006.
              99.1   Press Release dated January 25, 2006
             -------------------------------------------------------------------
             * Filed herewith


                                    SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


Date:  February 24, 2006                   NEWGOLD, INC.


                                           By: /s/ JAMES KLUBER
                                              ----------------------------------
                                              James Kluber
                                              Chief Financial Officer
                                              (Duly Authorized Officer)

EX-10.3

Exhibit 10.3

1

Exhibit 10.3

2

Exhibit 10.3

3

Exhibit 10.3

4

Exhibit 10.3

EX-10.4

                                                                    Exhibit 10.4























                               OPERATING AGREEMENT

                                       OF

                             CRESCENT RED CAPS, LLC,
                       a Nevada Limited Liability Company































                                                                    Exhibit 10.4

                                TABLE OF CONTENTS




                                                                                               
1.       FORMATION AND NAME........................................................................1

2.       PRINCIPAL OFFICE/REGISTERED OFFICE........................................................1
         Section 2.1       Principal Office........................................................1
         Section 2.2       Registered Office.......................................................1

3.       PURPOSE AND POWERS........................................................................1
         Section 3.1       Purposes................................................................1
         Section 3.2       Powers..................................................................2
         Section 3.3       Ownership of Company Property...........................................2

4.       TERM......................................................................................2

5.       MANAGEMENT................................................................................2
         Section 5.1       Number of Manager.......................................................2
         Section 5.2       Election and Term of Manager............................................2
         Section 5.3       Removal, Resignation and Vacancies......................................2
         Section 5.4       General Obligations.....................................................3
         Section 5.5       General Authority.......................................................3
         Section 5.6       Scope of Duties.........................................................5
         Section 5.7       Limitation of Liability of Manager......................................5
         Section 5.8       Binding Authority.......................................................6
         Section 5.9       Restrictions on Manager Authority.......................................6
         Section 5.10      Waiver of Self-Dealing..................................................7

6.       PAYMENTS TO Manager.......................................................................8
         Section 6.1       Reimbursement of Expenses...............................................8
         Section 6.2       Compensation for Services...............................................8

7.       RIGHTS AND RESTRICTIONS OF MEMBERS........................................................8
         Section 7.1       Rights of Members.......................................................8
         Section 7.2       Restrictions on Members.................................................8
         Section 7.3       Withdrawal of Member not Permitted......................................9
         Section 7.4       Other Breaches by Member................................................9
         Section 7.5       Limitation of Liability................................................10
         Section 7.6       Other Investment Activities of Members.................................10
         Section 7.7       Admission of New Members...............................................10

8.       MEETINGS.................................................................................10
         Section 8.1       Annual Meetings........................................................10
         Section 8.2       Special Meetings.......................................................11
         Section 8.3        Notice................................................................11








                                        i
                                                                    Exhibit 10.4

         Section 8.4       Waiver of Notice.......................................................11
         Section 8.5       Adjourned Meetings and Notice Thereof..................................11
         Section 8.6       Action by the Members Meetings; Quorum; Majority.......................11
         Section 8.7       Action by Written Consent..............................................12
         Section 8.8       Participation by Conference Telephone..................................12
         Section 8.9       Place of Meeting of Members............................................12

9.       CAPITAL CONTRIBUTIONS AND MEMBER'S INTERESTS.............................................12
         Section 9.1       Initial Capital Contributions..........................................12
         Section 9.2       Membership Interest....................................................12
         Section 9.3       Optional Contributions.................................................12
         Section 9.4       Required Contributions.................................................12
         Section 9.5       Remedies if Member Fails to Make Required Capital Contribution.........12
         Section 9.6       Delinquent Member Grants Security Interest in Company Interest.........13
         Section 9.7       No Right to Demand Return of Capital Contribution......................14

10.      CAPITAL ACCOUNTS.........................................................................14
         Section 10.1      Composition of Capital Account.........................................14
         Section 10.2      Capital  Account of Transferred Membership Interest....................15
         Section 10.3      No Deficit Restoration Obligation......................................15

11.      PROFITS AND LOSSES.......................................................................15
         Section 11.1      Net Profits and Losses.................................................15
         Section 11.2      Special Allocations....................................................15
         Section 11.3      Curative Allocations...................................................16
         Section 11.4      Transfers  During Taxable Year.........................................17
         Section 11.5      Right  to Use Alternative Method of Allocation.........................17

12.      INTEREST AND COMPENSATION, LOANS.........................................................17
         Section 12.1      Interest and Compensation..............................................17
         Section 12.2      Loans..................................................................17

13.      DISTRIBUTIONS TO MEMBERS.................................................................18
         Section 13.1      Distributable Cash.....................................................18
         Section 13.2      Restrictions on Distributions..........................................18
         Section 13.3      Allocation of Distributions............................................19
         Section 13.4      Amounts not Withdrawn..................................................19

14.      RESTRICTIONS ON TRANSFER OF A MEMBER'S INTEREST..........................................19
         Section 14.1      Conditions to Transfer.................................................19
         Section 14.2      Company's Unilateral Option to Purchase Interest.......................19
         Section 14.3      Admission of Substitute Members........................................20
         Section 14.4      Permitted Transfers....................................................21
         Section 14.5      Transfer Upon Death of Member..........................................21
         Section 14.6      Purchase Price.........................................................22













                                        ii
                                                                    Exhibit 10.4

         Section 14.7      Payment Terms..........................................................22
         Section 14.8      Nonrecognition of an Unauthorized Transfer.............................23
         Section 14.9      Governmental Approvals.................................................23

15.      DISSOLUTION AND LIQUIDATION..............................................................23
         Section 15.1      Events Requiring Dissolution...........................................23
         Section 15.2      Liquidation............................................................23
         Section 15.3      Manager's Powers During Liquidation....................................23
         Section 15.4      Distribution of Assets.................................................24
         Section 15.5      Gains or Losses........................................................24
         Section 15.6      Compliance with Timing Requirements of Treasury Regulation.............25
         Section 15.7      Accounting.............................................................25
         Section 15.8      Rights of Lenders......................................................25

16.
         INDEMNIFICATION..........................................................................25
         Section 16.1      Indemnification of Member, Employee or Agent: Proceeding Other than
                           by Company.............................................................25
         Section 16.2      Indemnification of Member, Employee or Agent: Proceeding
                           by Company.............................................................25
         Section 16.3      Advance of Expenses....................................................26
         Section 16.4      Determination of Indemnification.......................................26
         Section 16.5      Cooperation of Indemnitee..............................................26
         Section 16.6      Non-Exclusivity........................................................27
         Section 16.7      Insurance..............................................................27
         Section 16.8      Additional Indemnification.............................................27

17.      COMPANY RECORDS AND REPORTS..............................................................27
         Section 17.1      Books and Records......................................................27

18.      ALTERNATIVE DISPUTE RESOLUTION...........................................................28
         Section 18.1      Agreement to Use Procedure.............................................28
         Section 18.2      Initiation of Procedure................................................28
         Section 18.3      Direct Negotiations....................................................29
         Section 18.4      Mediator Selection.....................................................29
         Section 18.5      Mediation Time and Place...............................................29
         Section 18.6      Information Exchange...................................................29
         Section 18.7      Summary of Views.......................................................29
         Section 18.8      Parties to be Represented..............................................30
         Section 18.9      Conduct of Mediation...................................................30
         Section 18.10     Termination of Procedure...............................................30
         Section 18.11     Arbitration............................................................31
         Section 18.12     Mediation Fees; Disqualification.......................................31
         Section 18.13     Confidentiality........................................................31

19.      MISCELLANEOUS PROVISIONS.................................................................31












                                       iii
                                                                    Exhibit 10.4

         Section 19.1      Agreement to Perform Necessary Acts....................................31
         Section 19.2      Amendments.............................................................31
         Section 19.3      Notices................................................................32
         Section 19.4      Binding Effect.........................................................32
         Section 19.5      Severability...........................................................32
         Section 19.6      Governing Law..........................................................32
         Section 19.7      Foreign Qualification..................................................33
         Section 19.8      Federal Law Disclosure and Limitations.................................33
         Section 19.9      Tax Matters............................................................33
         Section 19.10     Counterparts...........................................................33
         Section 19.11     Headings, Gender and Number............................................34
         Section 19.12     Construction...........................................................34
         Section 19.13     Waiver.................................................................34
         Section 19.14     Attorney's Fees........................................................34
         Section 19.15     Creditors..............................................................34
         Section 19.16     Offset.................................................................34
         Section 19.17     Disclosure.............................................................34
         Section 19.18     Complete Agreement.....................................................35

20.      DEFINITIONS..............................................................................35
         Section 20.1      The Act................................................................35
         Section 20.2      Additional Proceedings.................................................35
         Section 20.3      Agreement..............................................................35
         Section 20.4      Code...................................................................35
         Section 20.5      Company................................................................36
         Section 20.6      Default Interest Rate..................................................36
         Section 20.7      Delinquent Member......................................................36
         Section 20.8      Determination Date.....................................................36
         Section 20.9      Dispute................................................................36
         Section 20.10     Distributable Cash.....................................................36
         Section 20.11     Effective Date.........................................................36
         Section 20.12     Initiating Party.......................................................36
         Section 20.13     Interest...............................................................36
         Section 20.14     Interest Holder........................................................37
         Section 20.15     Lending Member.........................................................37
         Section 20.16     Manager................................................................37
         Section 20.17     Member.................................................................37
         Section 20.18     Membership Interest....................................................37
         Section 20.19     Net Losses.............................................................37
         Section 20.20     Net Profits............................................................37
         Section 20.21     Qualified Appraiser....................................................37
         Section 20.22     Payment Terms..........................................................37
         Section 20.23     Procedure..............................................................37
         Section 20.24     Purchase Price.........................................................37
         Section 20.25     Regulations............................................................37













                                       iv
                                                                    Exhibit 10.4

         Section 20.26     Responding Party.......................................................38
         Section 20.27     Transferee.............................................................38
         Section 20.28     Transferring Member....................................................38
         Section 20.29     Valuation Date.........................................................38






















































                                       iv
                                                                    Exhibit 10.4

                               OPERATING AGREEMENT

                                       OF

                             Crescent Red Caps, LLC,
                       a Nevada Limited Liability Company


         This Operating  Agreement (the "Agreement") is entered by and among the
undersigned Members and Manager who have formed a limited liability company (the
"Company") to be governed  according to the terms and  conditions as hereinafter
set forth.

         1.       FORMATION AND NAME
                  ------------------

         On  February  9, 2006,  the  Members  formed the  Company by causing an
organizer to file Articles of Organization  pursuant to Chapter 86 of the Nevada
Revised Statutes, as amended (the "Act"), under the Company name of Crescent Red
Caps,  LLC. The Members hereby  approve and ratify the Articles of  Organization
and all actions of the Organizer in preparing and filing the same. The effective
date of this Agreement (the  "Effective  Date") shall be the date this Agreement
is signed by the Members and Manager.

         2.       PRINCIPAL OFFICE/REGISTERED OFFICE
                  ----------------------------------

         Section 2.1 Principal  Office.  The principal  office of the Company in
the State of Nevada shall be  established  at location as shall be determined by
the Manager from time to time. The Company may have such other  offices,  either
within or without the State of Nevada,  as the Manager may  designate  or as the
business of the Company may from time to time require.

         Section 2.2 Registered  Office.  The address of the initial  registered
office of the Company is 300 West 2nd Street, Carson City, Nevada 89703, and the
Registered Agent at such address is Peter Smith,  Esq. The registered office and
agent may be changed  from time to time by action of the  Manager  and by filing
the prescribed form with the Nevada Secretary of State.

         3.       PURPOSE AND POWERS
                  ------------------

         Section 3.1 Purposes.  The Company is formed  primarily for the purpose
of exploration,  development, financing, and mining of the certain mining claims
commonly  referred to as the  "Crescent  Valley" and "Red Caps" claims which are
located in Lander County, Nevada and are more particularly  described in Exhibit
A hereof  (the  "Claims"),  and to engage in any and all  activities  related or
incident thereto. Nevertheless, the authorized activities of the Company are not
intended to be limited  solely to its primary  purpose,  and the Company is more
generally  authorized to engage in any and all business activities  permitted by
the Articles of Organization and the Act.

         Section 3.2 Powers.  The Company shall have all the powers granted to a
limited



                                        1
                                                                    Exhibit 10.4


liability  company  under  the  laws of the  State  of  Nevada.  If the  Company
qualifies to do business in a foreign jurisdiction, the Company may transact all
business permitted in that jurisdiction.

         Section 3.3 Ownership of Company Property. All Company property will be
owned by and in the Company's  name. Each Member  expressly  waives any right to
require  partition  of any  Company  property.  The  Members  will  execute  any
documents  necessary to reflect the Company's  ownership of all Company property
and will record the  documents  in the public  offices  that may be necessary or
desirable in the Manager's  discretion.  No Member may demand or receive Company
property other than cash in return for the Member's contribution.

         4.       TERM
                  ----

         The Company  shall  commence its  existence on the date its Articles of
Organization  are filed  with the  Nevada  Secretary  of State.  The term of the
Company shall be perpetual,  and the Company shall dissolve only as specified in
the Articles of Organization.

         5.       MANAGEMENT
                  ----------

         Section 5.1 Designation of Manager. The Company shall be managed by one
(1) Manager. A Manager need not be a Member.  Until its successor is elected and
qualified  pursuant to the terms of this  Agreement,  the Manager of the Company
shall be Newgold, Inc., a Delaware corporation.

         Section 5.2 Removal,  Resignation and Vacancies. If Newgold, Inc. fails
to make its capital  contributions  when due within a grace period of forty-five
(45) days,  then  Newgold,  Inc. may be removed upon the written  request of the
remaining  Members  other than Newgold,  Inc. Any  successor  Manager who is not
Newgold,  Inc.  may  be  removed  from  office  with  or  without  cause  by the
affirmative vote of the Members holding a majority of the Membership  Interests.
Any Manager may resign as a Manager at any time by giving  written notice to the
Members.  Any such  resignation  shall take effect on the date of the receipt of
such notice or any later time specified therein.  Unless otherwise  specified in
such notice,  the acceptance of such resignation  shall not be necessary to make
it  effective.  The Members,  and only the Members,  may fill any vacancy in the
office of any  Manager by the  affirmative  vote or  written  consent of Members
holding a majority of the Membership Interests.

         Section 5.3 General Obligations. The Manager shall execute and cause to
be filed original or amended  documents and shall take any and all other actions
as may be reasonably necessary to perfect and maintain the status of the Company
as a limited  liability  company  under the laws of the State of Nevada  and any
other states or jurisdictions in which the Company engages in business.

         Section 5.4 General Authority. Subject to the provisions of Section 5.3
and Section  5.9  hereof,  the Manager  shall have the  complete  and  exclusive
control over the management of the business and affairs of the Company. If there
is more  than one  Manager,  the  rights  and  powers  of the  Manager  shall be
exercised among them as they may agree among  themselves,  but in the absence of
such an agreement or in the event of deadlock or other lack of decision



                                       -2-
                                                                    Exhibit 10.4


pursuant to such other  agreement,  they shall be bound by the majority  vote of
the  Manager  then in office.  Except as provided in Section 5.3 and Section 5.9
hereof,  the Members  shall have no right to  participate  in the  management or
control of the  business  and  affairs of the  Company,  and shall have only the
voting rights  specifically set forth in this Agreement or as otherwise required
and not subject to waiver  under the Act. A Manager may grant a proxy to another
Manager  to vote on any  matter  requiring  the vote of  Manager  hereunder.  In
addition  to this  general  management  authority,  the  Manager  shall have the
following  specific  rights,  subject to compliance with the other provisions of
this Agreement:

                  1. To  contract  to sell,  sell,  lease,  exchange,  grant any
option on,  subdivide,  or otherwise  transfer or dispose of any Company real or
personal property or any portion thereof or any interest therein;

                  2. To operate,  manage,  and  collect  income from any real or
personal property owned by the Company in accordance with this Agreement;

                  3. To retain,  without liability,  any property in the form it
is received  without regard to its  productivity  or the proportion that any one
asset or class of assets may bear to the whole;

                  4. To borrow  money from banks,  other third party  lenders or
the Members on terms and conditions  which the Manager deem  reasonable,  and to
pledge,  mortgage  and grant  security  interests or deeds of trust in or on any
property  owned by the  Company as  security  for the  payment  of  indebtedness
authorized by this Agreement;

                  5. To mortgage,  pledge, hypothecate or authorize or grant any
security  interest  or lien  in or on  Company  property  other  than to  secure
repayment of indebtedness authorized by this Agreement;

                  6. To make any reasonable  expenditures for the  organization,
operation  and  conduct  of the  business  and  affairs  of the  Company  and to
negotiate,  execute,   acknowledge,   file,  record,  deliver  and  perform  any
agreements and  instruments  considered  necessary or appropriate by the Manager
for the conduct of the Company  business  and  affairs in  accordance  with this
Agreement or for the implementation of the powers granted under this Agreement;

                  7. To prepay,  modify,  amend, renew, or extend any authorized
Company indebtedness;

                  8. To carry out the  purposes  of the  Company  through  other
partnerships, corporations, limited liability companies, or other entities;

                  9. To compromise claims against the Company;


                  10. To make any and all elections for federal, state and local
tax purposes  including any election,  if permitted by applicable  law to adjust
the basis of  property  pursuant  to






                                       -3-
                                                                    Exhibit 10.4


Sections 754, 734(b) and 743(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), or comparable provisions of state or local law, in connection with
transfers of any Membership Interest in the Company and Company distributions;

                  11. To  execute  and  accept any  instrument,  conveyance,  or
agreement  incident to the Company's  business or property  without the joinder,
ratification, or consent of any Member;

                  12. To maintain insurance for the benefit of the Company;

                  13. To perform the Company's obligations, and exercise all the
Company's  rights,  under any agreement to which the Company or its nominee is a
party,  including  the Red Caps Lease and Crescent  Valley Lease as  hereinafter
defined,  and the Company's right to exercise any option to purchase an Interest
in the Company under Article XIV of this Agreement;

                  14. To loan funds to any Member on terms and conditions deemed
reasonable by the Manager;

                  15. To advance  any  monies to the  Company  required  for the
Company's business, but with no obligation to do so;

                  16. To enter  into  contracts  and  business  undertakings  to
further the purposes of the Company, including the Claims;

                  17. To open and  maintain  bank and  investment  accounts  and
arrangements,  drawing checks and other orders for paying money, and designating
individuals  with authority to sign or give  instructions  with respect to those
accounts and arrangements;

                  18. To maintain the Company property in good order;

                  19. To collect sums due the Company;


                  20. To invest and  reinvest  liquid  assets of the  Company to
accomplish Company purposes,

                  21.  To  distribute   Distributable   Cash  subject  to  other
provisions of this Agreement;

                  22.  To  execute  and  file  certificates  or  instruments  as
required  or  permitted  by the Act and any  other  laws of  Nevada or any other
jurisdiction where the Company does business;

                  23. To  withhold  any  funds due to a Member  who is a foreign
person,  as may be required by the  Internal  Revenue  Code and its  promulgated
regulations;









                                       -4-
                                                                    Exhibit 10.4


                  24. To invest  Company funds in commercial  paper,  government
securities,  certificates of deposit, time deposits, banker's acceptances, money
market funds,  or similar  investments  having a maturity  generally  considered
being short term;

                  25. To arrange  for  securities  acquired by the Company to be
held by an established  securities  brokerage firm, trust  department,  or other
custodian  chosen by the  Manager in an account or  accounts  in the name of the
Company  and to direct such  custodian  to invest,  hold,  sell,  exchange,  and
reinvest the funds of the Company and to collect dividends, interest, royalties,
rent and other  income  payable to the  Company,  and to present  securities  at
maturity,  to vote proxies  solicited by or with  respect to  securities  and to
otherwise act in the best interests of the Company; and

                  26. To employ or engage and compensate  persons in addition to
the  Manager  to manage or  operate  Company  property  and to  perform  Company
administrative  services,  accounting  services,  independent auditing services,
legal services, and other services,  whether discretionary or otherwise, for the
benefit of the Company.

         Section  5.5 Scope of Duties.  The  Manager  shall not be  required  to
devote its full time to the business or affairs of the Company, but shall devote
the time  reasonably  necessary to perform the duties of the Manager  under this
Agreement  and to  prudently  manage and  operate  the  Company's  business  and
properties.

         Section 5.6       Limitation of Liability of Manager.

                  1. The  Manager  shall  not be  liable  for the  return of any
contribution of capital of any Member or for any profits thereon, and any return
of capital  and  profits  shall be made,  if at all,  solely from the assets and
business of the Company.

                  2. Except as otherwise  provided  herein,  no Manager shall be
liable to the  Company or the Members or other  Interest  Holders for any act or
omission in  connection  with the business or affairs of the Company  including,
without  limitation,  any breach of fiduciary duty as a Manager,  any mistake of
judgment and any business decision  (including any decision regarding the timing
of any  acquisition or  disposition of any property of the Company),  so long as
the Manager  against whom liability is asserted acted in good faith on behalf of
the Company and in a manner reasonably  believed by the Manager to be within the
scope  of  authority  under  this  Agreement  and in the best  interests  of the
Company,  unless such act or omission constitutes gross negligence,  intentional
misconduct, fraud or a knowing violation of law.

         Section  5.7 Binding  Authority.  Whether or not there is more than one
Manager,  the  signature  of any one  Manager  under  this  Agreement  shall  be
sufficient  to  bind  the  Company  to  any  agreement  or on  any  document  or
instrument. Each Member and other Interest Holder agrees not to assert any claim
to the effect that execution or  performance of any such  instrument or document
breached this Agreement or the duties of the Manager, against any person dealing
with the Manager in good faith and without  actual notice of the asserted  claim
at the time of the delivery of the  instrument  or document,  provided that this
Section 5.8 shall not be construed  to



                                       -5-
                                                                    Exhibit 10.4


limit any  recourse  by any Member  against  the  Manager or the Company for any
breach of this  Agreement or the duties of the Manager.  Any person dealing with
the  Company  may rely upon a  certificate  signed by any  Manager as to (a) the
identity of any Member,  (b) any fact  relevant to the Company,  and (c) the due
authority of persons purporting to act on behalf of the Company.

         Section 5.8  Restrictions  on Manager  Authority.  Except as  otherwise
stated  herein,  no Manager  shall  directly  or  indirectly  perform any of the
following  actions without the vote or written consent of a majority in interest
of the Members:

                  1. Do any act in contravention  of this Agreement,  as amended
from time to time;

                  2. Do any act which would make it  impossible  to carry on the
ordinary  business  of the  Company,  provided  that  actions of the  Manager in
accordance  with the purposes of the Company or rights and powers  granted under
this Agreement shall not be considered to breach this clause;

                  3. Confess a judgment against the Company;

                  4.  Possess  Company  property,  or assign  rights in specific
Company property, for other than a Company purpose;

                  5. Knowingly  perform any act that would subject any Member to
general  liability  for  the  debts  and  liabilities  of  the  Company  in  any
jurisdiction;

                  6. Amend this  Agreement or the number of Manager set forth in
Section 5.1 hereof;

                  7. Extend the statute of  limitations  for  assessment  of tax
deficiencies  against the Company and its Members with respect to adjustments to
the Company's federal, state or local tax returns; or

                  8.  Merge  or  otherwise   engage  in  any  kind  or  business
combination or reorganization with another entity or other person.

                  9. Incur debt on behalf of the Company or  otherwise  encumber
the assets of the Company in an amount in excess of $100,000.

                  10. Sell, mortgage,  lease or otherwise transfer the Company's
interest in the Claims.

         Section 5.9       Waiver of Self-Dealing.

                  1. Provided the  transaction  terms are no less favorable than
those the Company may obtain from unrelated third parties, the Manager may enter
into any transaction on the Company's behalf despite the fact that another party
to the transaction may be:







                                       -6-
                                                                    Exhibit 10.4


                           1. A trust of which a Manager  or Member is a trustee
or beneficiary;

                           2. An  estate  of  which a  Manager  or  Member  is a
personal representative or beneficiary;

                           3. A business  controlled  by one or more  Manager or
Member or a business of which any Manager or Member is also a director, officer,
or employee;

                           4. Any affiliate, employee,  stockholder,  associate,
manager, partner, member or business associate or a Manager or Member;

                           5. Any Manager or Member acting individually; or

                           6. Any relative of a Manager or Member.

                  2. Other than with  respect to the  purposes of the Company as
defined  above,  Manager may engage in or possess an interest in other  business
ventures of any nature or  description,  independently  or with others,  whether
such ventures are competitive with the Company or otherwise,  and the pursuit of
such ventures shall not be wrongful or improper, and neither the Company nor any
Member  shall  have any right by virtue of this  Agreement  in or to any of such
ventures,  or in or to the income,  gains, losses or deductions derived or to be
derived  therefrom.  The Manager  shall not be obligated to offer or present any
particular  investment or business  opportunity to the Company,  even where such
opportunity is of a character which, if presented to the Company, could be taken
and  exploited  by the Company,  but rather the Manager  shall have the right to
take for  their own  account  or to  recommend  to  others  any such  particular
investment  or business  opportunity.  Notwithstanding  anything to the contrary
herein,  the  Manager or any  Member may  present  any such  opportunity  to the
Company  as a  transaction  for the  Company  to  pursue  or  participate  as an
investor, broker, adviser, consultant or otherwise.

         6.       PAYMENTS TO MANAGER
                  -------------------

         Section  6.1  Reimbursement  of  Expenses.  The  Company  shall  pay or
reimburse the Manager for all reasonable legal,  accounting,  travel,  and other
fees and expenses  incurred by the Manager in connection with the performance of
its  obligations  under this  Agreement  other than amounts  considered  capital
contribution made by the Manager in its capacity as a Member.

         Section  6.2  Compensation  for  Services.  The Manager  shall  receive
reasonable  compensation,  paid at least annually,  for services rendered to the
Company.  Reasonable  compensation  is to be  measured  by the time  required in
administering  the  business of the  Company,  the value of  property  under the
Manager's  administration,  and the responsibilities  assumed in discharging the
duties of office.  Additionally,  the compensation must comply with Code Section
704(e),  if  applicable.  The  Manager's  compensation  shall  be  treated  as a
guaranteed  payment for Federal  income tax purposes where the Manager is also a
Member.  The  Members  holding a  majority  of the  Membership  Interests  shall
determine  and  adjust  the  Manager's  compensation  based  upon the  Manager's
performance and dedication of time to



                                       -7-
                                                                    Exhibit 10.4


Company  business.  If  the  Company  cash  flow  is  insufficient  to  pay  the
compensation,  the unpaid portion of the  compensation  may be deferred and bear
interest  at the  Default  Interest  Rate.  Payments  to a Manager who is also a
Member for  services  rendered to the  Company  will not be a return on invested
capital, but will be paid as compensation for services rendered.

         7.       RIGHTS AND RESTRICTIONS OF MEMBERS
                  ----------------------------------

         Section 7.1 Rights of Members. In addition to the other rights to which
Members are entitled  pursuant to the Act or the Articles of  Organization,  the
Members  shall have the right to vote on the matters  which are required by this
Agreement to be approved by the Members.

         Section 7.2       Restrictions on Members.

                  1. No  Member  shall  have any  power or  authority  to act on
behalf of or to bind the Company or any other Member, or to pledge the Company's
credit or to render the Company  liable  pecuniarily  for any purpose.  A Member
shall not take any action which would adversely affect the limited  liability of
a Member, or affect the status of the Company for Federal income tax purposes.

                  2. No Member,  in the  capacity  as such,  shall do any of the
following:

                           1. Borrow or lend money on behalf of the Company;

                           2. Purport to or sell, mortgage,  lease, or otherwise
dispose of or encumber property of the Company;

                           3.  Sell,  assign,  pledge,  or  mortgage  a Member's
Interest in the Company, except as otherwise provided in Article 14;

                           4. Exercise or represent to any third party that such
Member has the right to exercise  any of the powers of the Manager  described in
this Agreement; or

                           5.  Exercise  any right or power  which  could not be
exercised by a limited partner of a limited  partnership  under applicable state
law.

         Section 7.3  Withdrawal  of Member not  Permitted.  No Member  shall be
permitted  to  withdraw as a Member of the Company or receive a return of any of
the Member's  contributions  to capital before the dissolution and winding up of
the  Company,  except as provided  for in Section  9.1. A Member who attempts to
withdraw in violation of this  Agreement  shall be liable for all damages caused
by such breach and the Manager may, in their discretion,  exercise such remedies
against  the Member on behalf of the Company as the  Manager  deem  appropriate,
including those remedies set forth in NRS ss.86.335.

         Section  7.4 Other  Breaches  by  Member.  A Member who  breaches  this
Agreement  will be liable to the Company  for all damages  caused by the breach.
The Company may offset for the damages  against any  distributions  or return of
capital to the Member who has breached



                                       -8-
                                                                    Exhibit 10.4


this Agreement. A Member will breach this Agreement if the Member:

                  1. Attempts to withdraw from the Company;

                  2. Interferes in the management of the Company affairs;

                  3.  Engages in conduct  that may cause the Company to lose its
tax status as a partnership;

                  4.  Engages in conduct  that tends to bring the  Company  into
disrepute;

                  5.  Owns a  Membership  Interest  that  becomes  subject  to a
charging order, attachment, garnishment, or similar legal proceedings;

                  6. Breaches any confidentiality provisions of this Agreement;

                  7. Fails to meet any commitment to the Company; or

                  8. Causes or attempts to cause the Company's  dissolution  and
winding up by court decree or otherwise,  except as expressly  permitted in this
Agreement.

         Section 7.5  Limitation  of  Liability.  Notwithstanding  anything else
contained in this  Agreement,  a Person who is a Member is not liable  solely by
reason of being a Member  under a judgment,  decree,  order of court,  or in any
other  manner,  for a debt,  obligation  or  liability  of the Company  (whether
arising in contract,  tort,  or  otherwise)  or for the acts or omissions of any
other Member, Manager, agent or employee of the Company.

         Section 7.6 Other Investment  Activities of Members.  A Member may have
other business interests and may engage in other activities in addition to those
relating to ownership of an Interest in the Company. Neither the Company nor any
Member  shall  have  any  right,  by  virtue  of this  Agreement,  to  share  or
participate  in such other  investments  or activities of any other Member or to
income or proceeds  derived  therefrom.  Any Member may engage  independently or
with others in other business ventures of every nature and description.  Neither
the Company nor any Member  shall have any right by virtue of this  Agreement or
the  relationship  created  hereby in or to any other  ventures or activities in
which any Member is involved or to the income or proceeds derived therefrom. The
pursuit of other  ventures and  activities by Members is hereby  consented to by
the Members and shall not be deemed  wrongful or  improper.  No Member  shall be
obligated to present any  particular  business or investment  opportunity to the
Company even if such  opportunity is of a character  which,  if presented to the
Company, could be taken by the Company.

         Section 7.7  Admission  of New Members.  The initial  Members are those
Members who executed this  Agreement on the Effective  Date.  New Members may be
admitted to the Company only upon the unanimous  vote or written  consent of all
existing Members. Before being admitted, each new Member shall first be required
to  execute a written  consent  to be






                                       -9-
                                                                    Exhibit 10.4


bound by the terms and  conditions  of the  Articles  of  Organization  and this
Agreement,  and  shall  further  provide  such  normal  and  customary  security
representations  and  restrictions  as may be  necessary to allow the Company to
lawfully avoid registering the Membership  Interest under applicable federal and
state  securities  regulations.  Once a new Member is  admitted,  the new Member
shall have the rights and obligations of a Member.

         8.       MEETINGS
                  --------

         Section 8.1 Annual Meetings. The annual meeting of the Members shall be
held each year at such time and place as are determined by the Manager.  Failure
to hold an annual  meeting shall not constitute a breach of this Agreement or in
any way  affect  the  Company's  status as a limited  liability  company in good
standing.

         Section 8.2 Special  Meetings.  Special  meetings of the Members may be
called at any time by the Manager or any Member by delivering  written notice of
such meeting to the Manager.

         Section 8.3 Notice.  The Manager of the Company  shall cause  notice of
the annual meeting, and any special meeting, to be given to each Member entitled
to vote at the  meeting,  either in  person,  by fax,  or by first  class  mail,
postage  pre-paid,  not less than ten (10) days nor more  than  sixty  (60) days
prior to such meeting. The notice shall specify the place, the day, and the hour
of such meeting.  In addition,  the notice of any special  meeting shall specify
the purpose or purposes for which the meeting is called.  Notice shall be deemed
delivered  by first  class mail if mailed to the  address of each Member as such
Member's address appears on the Company's records.

         Section  8.4 Waiver of Notice.  Any  meeting  of the  Members,  however
called  and  noticed  or  wherever  held,  shall be as valid as though  had at a
meeting duly held after regular call and notice, if a quorum be present, and if,
either  before or after the  meeting,  each of the Members  not present  signs a
written  waiver of notice or a consent to holding such meeting or an approval of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the records or made a part of the minutes of the meeting.

         Section  8.5  Adjourned  Meetings  and  Notice  Thereof.  Any  Members'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority, present in person or represented by
proxy, but in the absence of a quorum no other business may be transacted at any
such  meeting.  Other  than  by  announcement  at  the  meeting  at  which  such
adjournment  is  taken,  it shall  not be  necessary  to give any  notice  of an
adjournment  or of  the  business  to be  transacted  at an  adjourned  meeting.
However,  when any Members' meeting,  either annual or special, is adjourned for
thirty (30) days or more,  notice of the adjourned  meeting shall be given as in
the case of an original meeting.

         Section  8.6 Action by the  Members  Meetings;  Quorum;  Majority.  The
Members may only vote upon  matters as to which the Members  are  authorized  to
take action  pursuant to this  Agreement or by applicable law and not subject to
modification  or  waiver.  Except as  specifically  otherwise  provided  herein,
Members may vote,  approve a matter or take any action



                                      -10-
                                                                    Exhibit 10.4


by the vote of Members at a meeting,  in person or by proxy or without a meeting
by written  consent.  For any meeting of Members,  the  presence in person or by
proxy of Members  owning more than fifty percent  (50%) of the total  Membership
Interests  at the  time  of the  action  taken  constitutes  a  quorum  for  the
transaction of business.  If any Membership  Interest has been transferred under
this  Agreement  to  persons  who are  Interest  Holders  but who  have not been
admitted as Members,  the voting rights associated with such Interests shall not
be  considered  outstanding  for  purposes  of any vote by  Members  under  this
Agreement  unless by the terms of the transfer the assigning Member retains such
voting rights and the Company  received  actual written notice of the foregoing.
The voting  power or rights of the  Members for all  purposes of this  Agreement
shall be  determined as of the date of giving notice of the meeting or as of the
date of the notice for proposed action by written consent without a meeting.

         Section 8.7 Action by Written  Consent.  Any action may be taken by the
Members  without a meeting  if  authorized  by the  written  consent  of Members
holding more than fifty percent (50%) of the Membership Interests, or such other
percentage as may be required  under the Act or this  Agreement.  In no instance
where  action is  authorized  by  written  consent  need a meeting of Members be
called or noticed.

         Section 8.8  Participation  by  Conference  Telephone.  The Members may
participate  in a meeting  by means of  conference  telephone  or other  similar
communications  equipment that enables all of the Members  participating  in the
meeting to hear each other.  Such  participation  shall  constitute  presence in
person at the meeting.

         Section  8.9 Place of Meeting of Members.  The  meetings of the Members
shall be held at the location stated in the notice thereof.

         9.       CAPITAL CONTRIBUTIONS AND MEMBER'S INTERESTS
                  --------------------------------------------

         Section  9.1  Initial  Capital   Contributions.   The  initial  capital
contributions of the Members shall be as follows:

                           (a)  ASDi, LLC's Contribution

                             1. ASDi,  LLC  shall  contribute,  at its  cost and
                                expense, its leasehold interest in the Claims as
                                set  forth  and  subject  to the  terms  of that
                                certain  lease  agreement  dated  May  16,  2003
                                attached  hereto as  Exhibit B as a part  hereof
                                (the "Red Caps Lease") subject to ASDi obtaining
                                the necessary consents and waivers arising under
                                Section  12  of  the  Red  Caps  Lease  ("ASDi's
                                Contribution - Red Caps").

                             2. ASDi,  LLC  shall  contribute,  at its  cost and
                                expense, its leasehold interest in the Claims as
                                set  forth  and  subject  to the  terms  of that
                                certain lease  agreement dated September 3, 2003
                                attached  hereto as  Exhibit C as a part  hereof
                                (the "Crescent  Valley  Lease")  subject to ASDi
                                obtaining  the  necessary  consents  and waivers
                                arising under Section 12 of the Crescent  Valley
                                Lease ("ASDi's Contribution -

                                      -11-
                                                                    Exhibit 10.4


                                Crescent Valley").

                             3. Other than the ASDi  Contribution - Red Caps and
                                Crescent Valley, ASDi, LLC shall not be required
                                to  contribute  further  capital,  or  undertake
                                further  acts in order to  acquire,  or hold its
                                Membership Interest in the Company

                           (b)  Newgold,  Inc.'s  Contribution  Subject  to ASDi
obtaining  the necessary  consents and waivers  arising under Section 12 of both
the Red Caps Lease and Crescent  Valley Lease,  Newgold,  Inc. shall  contribute
capital in the form of cash,  or good funds  which  shall be applied  toward the
exploration and development of mining reserves  arising under the Red Caps Lease
and Crescent  Valley Lease which shall include the payment of rent,  maintenance
fees, and any other costs of maintaining  the Red Caps Lease and Crescent Valley
Lease in accordance with the following minimum capital contribution requirements
(singly  "Minimum  Capital   Contribution"  and  collectively  "Minimum  Capital
Contributions"):

                                    (i) A  payment  to ASDi  LLC of two  million
five hundred  thousand shares of Newgold common stock plus a warrant to purchase
a similar amount of common stock for $0.40 for three years from the date of this
agreement.

                                    (ii)  During  the twenty  four month  period
after the  execution  of this  Agreement  by the  Members,  the  minimum  sum of
$1,000,000  (U.S.) which can be expended by the Company or by Newgold,  Inc. for
the account of the Company.

                                    (iii) During the twenty fifth through thirty
sixth month period after the  execution  of this  Agreement by the Members,  the
minimum  sum of  $1,700,000  (U.S.)  which can be  expended by the Company or by
Newgold, Inc. for the account of the Company.

In  the  event  Newgold,   Inc.   contributes  more  than  the  Minimum  Capital
Contribution required to be contributed above during any applicable period, such
excess  amount  shall be credited  against the next  installment  of the Minimum
Capital  Contributions  to  be  payable  by  Newgold,  Inc.  for  any  remaining
outstanding  period(s).   Newgold,  Inc.  may  accelerate  its  Minimum  Capital
Contributions to a period shorter than that provided in this Section 9.1 (b). In
the event Newgold, Inc. fails to contribute the Minimum Capital Contribution for
any  applicable  period after  reflecting any credits,  the percentage  interest
represented by its  Membership  Interest shall be pro-rated for the then current
period  based on the  percentage  the actual  contribution  bears to the Minimum
Capital Contribution  required for that twelve month period. Any amounts paid by
Newgold,  Inc. in excess of the Minimum Capital  Contributions shall be credited
to its capital  account,  but shall not entitle  Newgold,  Inc. to increase  its
Percentage  Interest in the Company represented by its Membership  Interest,  or
priority return.

                           (c)  Exceptions to Lease Claims   In the  event  that
within twelve months after the execution of this Agreement any exceptions  arise
to any of the claims  covered by the Red Caps Lease and Crescent  Valley  Lease,
Newgold, Inc. shall have the following options:



                                      -12-
                                                                    Exhibit 10.4


                                    (i)  To  have  any   capital   contributions
returned to it by ASDi and any future obligations of Newgold,  Inc. shall become
null and void.  If the  option to have any  capital  contributions  returned  is
exercised by Newgold,  Inc.  then ASDi shall  subordinate  to Newgold,  Inc. its
interest  in this  Agreement  as well as its  interest in the Red Caps Lease and
Crescent  Valley Lease until such time as Newgold Inc.'s  capital  contributions
are repaid in full.  Additionally,  as  compensation  to  Newgold  for its time,
effort and capital contributed to the Company, ASDi shall pay a $500,000 breakup
fee to Newgold,  Inc. as full  consideration  for Newgold's efforts in enhancing
the value of the Red Caps Lease and Crescent Valley Lease.

                                    (ii)  Elect for ASDi to make all  reasonable
expenditures to eliminate such claims that have arisen.  Such expenditures shall
be made with the  understanding  that time is of the essence in eliminating such
claims.  Such  expenditures  made by ASDi  shall  not be  considered  a  Capital
Contribution by ASDi.

                                    (iii)   Elect   to   make   all   reasonable
expenditures to eliminate such claims that have arisen.  Such expenditures shall
be made with the  understanding  that time is of the essence in eliminating such
claims.  Such  expenditures  made by  Newgold  shall  be  considered  a  Capital
Contribution  by Newgold  and shall be  considered  to have a priority  over any
future distributions otherwise owed to ASDi per this Agreement.

Other than the  contributions  by the Members set forth above, the Members shall
not be required to  contribute  further  capital,  or undertake  further acts in
order to acquire,  or hold their respective  Membership Interest in the Company.
All original contributions have been fully received and credited to the Members'
respective  capital  accounts  as initial  contributions  to the  capital of the
Company.

         Section  9.2  Membership  Interest.  The  Membership  Interest  and the
corresponding  percentage  interests  of the Members in the Company  shall be in
accordance with the following:

                           (a)  Upon   execution  of  this   Agreement,   ASDi's
Membership  Interest  shall be equal to a percentage  interest in the Company of
77.78% and Newgold, Inc.'s Membership Interest shall be equal to a percentage in
the Company of 22.22%.

                           (b) If Newgold,  Inc. contributes the Minimum Capital
Contribution required in Section 9.1(b)(i) and $1,000,000 during the twenty four
month period  following  the  execution of this  Agreement  in  accordance  with
Section  9.1(b)(ii),  thereafter ASDi's Membership  Interest shall be equal to a
percentage  interest in the  Company of 55.56% and  Newgold,  Inc.'s  Membership
Interest shall be equal to a percentage in the Company of 44.44%.

                           (d) If Newgold,  Inc. contributes the Minimum Capital
Contributions  required  in Section  9.1(b)(i)-(ii)  and  $1,700,000  during the
twenty fifth through  thirty sixth month period  following the execution of this
Agreement in accordance with Section  9.1(b)(iii),  thereafter ASDi's Membership
Interest  shall be equal to a  percentage  interest in the Company of 33.34% and
Newgold,  Inc.'s  Membership  Interest  shall be equal  to a  percentage  in the
Company of 66.66%.



                                      -13-
                                                                    Exhibit 10.4


                           (e) If Newgold,  Inc. contributes the Minimum Capital
Contributions required in Section 9.1(b) (i)-(iii) then Newgold may periodically
increase its  Membership  Interest at any time up to 100%  ("Additional  Capital
Contributions") after and based on the results of the drilling programs from the
expenditure  of  $2,700,000.  The results  shall be  determined at the time that
drilling  program  expenditures  reach  $2,700,000 (the "valuation  date").  The
Additional Capital  Contributions  shall be based on a value of $10 per ounce of
gold for all  indicated  resources  and a value of $25 per ounce of gold for all
indicated  reserves,  with Newgold  paying  33.34% of the value for the total of
resources  and  reserves  as  indicated  on the  valuation  date.  The amount of
indicated  resources  and  reserves  existing  on the  valuation  date  shall be
determined by an independent mining appraiser  mutually  acceptable to both ASDi
and Newgold,  Inc. For example, at completion of the drilling programs, if there
were  400,000  ounces of  indicated  resources  and 600,000  ounces of indicated
reserves,  then total value of the indicated resources and reserves would be $19
million, with ASD's proportionate 33.34% interest worth $6,334,600. Accordingly,
in this example by paying up to $6,334,600  Newgold could  increase its interest
to 100% in the Red Caps Lease and Crescent Valley Lease.

         Section 9.3 Optional  Contributions.  Subsequent optional contributions
to the capital of the  Company may be made in such  amounts and at such times as
the Members shall from time to time agree by the unanimous vote of the Members.

         Section  9.4  Remedies  if  Member  Fails  to  Make  Required   Capital
Contribution.  If a Member  fails  to make a  capital  contribution  by the time
required,  that Member shall not be entitled to own percentage  interests in the
Company with respect to its  Membership  Interest  other than to what the Member
was entitled in the capital contribution had not been made. Neither the Company,
nor the other Members shall have any further rights under this Agreement, at law
or in  equity  against  the  Member  who made a  required  capital  contribution
hereunder.

         Section  9.5 No Right to Demand  Return  of  Capital  Contribution.  No
Member  may  demand  the  return  of all or any  part of that  Member's  capital
contributions.

         10.      CAPITAL ACCOUNTS
                  ----------------

         Section 10.1 Composition of Capital Account.  Separate capital accounts
shall be  maintained  by the  Company for each  Member in  accordance  with Code
Section 704(b) and the  Regulations  promulgated  thereunder,  representing  the
Members' respective capital contributions to the Company.

                  1. The  capital  account of each Member  shall  consist of the
original contribution to capital by the Member, increased by the following:

                           1. The fair market value of any property  contributed
by the Member to the Company  (net of  liabilities  secured by such  contributed
property  that the Company is considered to assume or take subject to under Code
Section 752);

                           2.  Additional  contributions  by the Member of cash;
and




                                      -14-
                                                                    Exhibit 10.4


                           3. The Member's  share of the  Company's  Net Profits
allocated to the Members  pursuant to Article 11,  including  income and gain as
computed   for  book   purposes   in   accordance   with   Regulations   Section
1.704-1(b)(2)(iv)(g).

                  2. The capital account of the Member shall be decreased by the
following:

                           1. The amount of money  distributed  to the Member by
the Company pursuant to Article 13;

                           2. The fair market value of property  distributed  to
the Member by the Company (net of liabilities  secured by such property that the
Member is considered to assume or take subject to pursuant to Code Section 752);
and

                           3.  Allocations  to the  Member of  Company  loss and
deductions,  including loss and deductions  computed for book purposes described
in Regulations Section 1.704(b)(2)(iv)(g).

                  3. In cases where Code Section  704(c)  applies to property of
the Company,  the Members' capital accounts shall be adjusted in accordance with
Regulations  Section  1.704-1(b)(2)(iv)(g)  for  allocations  to the  Members of
depreciation,  depletion,  amortization,  gain,  and loss,  as computed for book
purposes, with respect to such property.

                  4. The  capital  accounts  of the  Members  may be adjusted to
reflect a revaluation of Company property  (including  intangible assets such as
goodwill) on the Company's books, to the extent provided in Regulations  Section
1.704-1(b)(2)(iv)(f).

                  5. The Manager may make all elections  for federal  income tax
purposes,  including  an election  to adjust the basis of the  Company  property
pursuant to Code  Sections  734, 743 and 754, in the event of the transfer of an
Interest in the Company or the  distribution  of  property by the  Company.  The
Members'   capital  accounts  shall  be  adjusted  to  the  extent  provided  in
Regulations Section 1.704-1(b)(2)(iv)(m).

                  6. The provisions of this Agreement  regarding the maintenance
of capital accounts are intended to comply with Code Section 704(b), as amended,
and the  Regulations  promulgated  thereunder.  Notwithstanding  anything to the
contrary  contained in this Article 10, the  Members,  by unanimous  consent may
modify  the method in which  capital  accounts  are  maintained,  provided  such
changes  are  consistent  with  Code  Section  704 and  Regulations  promulgated
thereunder.

                  7. Increases or decreases to a Member's  capital account shall
not affect the Member's  Membership Interest as defined in Section 20.15 of this
Agreement.

         Section 10.2 Capital Account of Transferred  Membership Interest.  Upon
the  transfer of all or any part of a  Membership  Interest as permitted by this
Agreement,  the capital account (or portion thereof) of the Transferring  Member
that is  attributable  to the  transferred  Interest (or portion  thereof) shall
carry  over  to  the   Transferee,   as   prescribed  by   Regulations   Section


                                      -15-
                                                                    Exhibit 10.4


1.704-1(b)(2)(iv)(1).

         Section 10.3 No Deficit  Restoration  Obligation.  This Agreement shall
not be  construed as creating an  obligation  to restore a deficit in a Member's
capital account balance.

         11.      PROFITS AND LOSSES
                  ------------------

         Section 11.1 Net Profits and Losses. After giving effect to the special
allocations  set forth in  Sections  11.2 and 11.3,  Net  Profits and Net Losses
shall be allocated and credited to the Members'  respective  capital accounts in
proportion to the respective Membership Interests as set forth in Section 9.2.

         Section 11.2      Special Allocations.

                  1.  Qualified  Income  Offset.  No allocation may be made to a
Member to the extent such  allocation  causes or increases a deficit  balance in
such Member's adjusted capital account.  Notwithstanding  any other provision of
this Agreement except Sections  11.2(b) and 11.2(c),  in the event that a Member
unexpectedly  receives an adjustment,  allocation or  distribution  described in
Regulations  Section  1.704-1(b)(2)(ii)(d)(4),  (5) or (6) which results in such
Member having a negative Adjusted Capital Account balance (as determined above),
then such Member  shall be  allocated  items of income and gain in an amount and
manner sufficient to eliminate, to the extent required by the Regulations,  such
negative  balance  in such  Member's  Adjusted  Capital  Account  as  quickly as
possible.  This provision is intended to satisfy the  "qualified  income offset"
items of the Code.

                  2.  Minimum  Gain   Chargeback.   Notwithstanding   any  other
provision of this Section  11.2,  if there is a net decrease in Company  minimum
gain for any Company  fiscal  year,  the  minimum  gain  chargeback  requirement
contained in  Regulations  Section  1.704-2  shall apply and each Member must be
allocated  items of Company income and gain for that year equal to that Member's
share of the net  decrease in Company  minimum  gain.  This  Section  11.2(b) is
intended  to  comply  with  the  minimum  gain  chargeback  requirement  of  the
Regulations and shall be interpreted consistently therewith.

                  3. Section 704(c) Allocation.  Solely for Federal,  state, and
local  income  tax  purposes  and not  for  book or  capital  account  purposes,
depreciation,  amortization,  gain,  or loss with  respect to  property  that is
properly  reflected  on the  Company's  books at a value that  differs  from its
adjusted  basis for Federal income tax purposes shall be allocated in accordance
with the principles and  requirements of Code Section 704(c) and the Regulations
promulgated thereunder,  and in accordance with the requirements of the relevant
provisions  of the  Regulations  issued under Code Section  704(b).  For capital
account  purposes,  depreciation,  amortization,  gain,  or loss with respect to
property  that is  properly  reflected  on the  Company's  books at a value that
differs  from  its  adjusted  basis  for tax  purposes  shall be  determined  in
accordance with the rules of Regulations Section 1.704-1(b)(2)(iv)(g).

                  4. Risk of Loss  Allocation.  Any item of  Member  nonrecourse
deduction (as defined in  Regulation  Section  1.704-2(i)(2))  with respect to a
Member nonrecourse debt (as




                                      -16-
                                                                    Exhibit 10.4


defined in Regulation Section 1.704-2(b)(4)) shall be allocated to the Member or
Members who bear the economic risk of loss for such Member  nonrecourse  debt in
accordance with Regulations Section 1.704-2(i)(1).

                  5.  Allocation  of  Excess  Nonrecourse  Liabilities.  For the
purpose of determining  each Member's share of Company  nonrecourse  liabilities
pursuant to Regulations Section 1.752-3(a)(3), and solely for such purpose, each
Member's  interest in Company  profits is hereby  specified to be such  Member's
Membership Interest.

         Section 11.3 Curative Allocations. The allocations set forth in Section
11.2  (the  "regulatory  allocations")  are  intended  to  comply  with  certain
requirements  of  Code  Section  704  and  Regulations  promulgated  thereunder.
Notwithstanding  any  other  provisions  of  this  Article  11,  the  regulatory
allocations shall be taken into account in allocating other profits,  losses and
items of income,  gain,  loss and  deduction  among the Members so that,  to the
extent possible, the net amount of such allocations of other profits, losses and
other items and the regulatory  allocations to each Member shall be equal to the
net amount that would have been  allocated to each such Member if the regulatory
allocations had not occurred.

         Section 11.4 Transfers During Taxable Year. All income,  gain, loss and
deductions  allocable pursuant to this Article 11 for a fiscal year with respect
to any  Membership  Interest  which may have been  transferred  during such year
shall be allocable between the Transferring Member and the Transferee based upon
the number of days that each was  recognized by the Company as the owner of such
Interest,  without  regard to the  results  of  Company  operations  during  the
particular   days  of  such  fiscal  year  and  without  regard  to  which  cash
distributions were made to the Transferring Member or the Transferee;  provided,
however,  that all income,  gain, loss and deductions so allocated as the result
of a capital  transaction  shall be  allocated  to the  recognized  owner of the
Membership  Interest for the day on which the capital transaction giving rise to
such gain occurred.

         Section   11.5  Right  to  Use   Alternative   Method  of   Allocation.
Notwithstanding  anything  else in this  Article 11, the Company  shall have the
right to use a different  method of allocating  Company income and loss if it is
advised by the Company  accountant  or tax counsel that the method of allocation
provided herein violates the Code or Regulations.  The Manager shall notify each
Member of any  change  in the  method of  allocating  Company  income or loss in
accordance with this paragraph promptly after the occurrence thereof.

         12.      INTEREST AND COMPENSATION, LOANS
                  --------------------------------

         Section 12.1 Interest and Compensation. No Member will be credited with
interest  on  his  or  her  capital  account,  and,  unless  the  other  Members
unanimously  agree,  no  Member  in his or her  capacity  as a  Member  shall be
entitled to any payments for services rendered on behalf of the Company.

         Section 12.2 Loans. Any Member may, with the approval of the Manager or
as provided by this  Agreement,  lend or advance  money to the  Company.  If any
Member  shall  make any loan or loans to the  Company  or  advance  money on its
behalf,  the  amount  of any such loan or  advance  shall  not be  treated  as a
contribution  to the  capital  of the  Company  but shall be a debt due from the
Company.  The amount of any such loan

                                       -17-
                                                                    Exhibit 10.4


or advance by a lending Member shall be repayable out of the Company's cash, and
shall bear  interest  at such rate and be  payable  under such terms as shall be
agreed between the Company and the lending Member at the time of the loan but in
the event of a failure to agree the interest rate shall be the Default  Interest
Rate.  Except  as  otherwise  provided  herein,  none of the  Members  shall  be
obligated to make any loan or advance to the Company.

         13.      DISTRIBUTIONS TO MEMBERS
                  ------------------------

         Section 13.1      Distributable Cash.

                  1. The Manager  shall  determine  the amount of  Distributable
Cash,  if any,  available for  distribution  at such times as the Manager of the
Company deem  advisable in accordance  with their  fiduciary duty to the Company
and the needs of the Company to operate its business.

                  2. This  determination of Distributable Cash must be made in a
manner consistent with the Company purposes, and must consider:

                           1. current needs for operating capital;

                           2. prudent reserves for future operating capital;

                           3. current investment opportunities;

                           4.   prudent    reserves   for   future    investment
opportunities and reclamation requirements;

                           5. the amounts of Company  debts and the necessity or
advisability of paying or reducing Company debts;

                           6.  preserving  Company  capital as a fund to protect
its creditors; and

                           7. the character of surplus Company property.

                  3. Any  contributed  property or borrowed funds by the Company
will be considered as needed for Company investment purposes.  Any cash produced
from selling  property  contributed  to the Company or from selling any property
purchased  with  borrowed  funds,  or any  reinvestment  of any of the property,
including the portion of the sale proceeds  representing  capital  appreciation,
will be  considered  as needed  reserves for Company  investment  purposes.  Any
Distributable  Cash derived from income will, to the extent  deemed  unnecessary
for Company purposes by the Manager under the foregoing  standard,  be available
for distribution in accordance with this Agreement.

         Section 13.2  Restrictions on Distributions.  No distribution  shall be
made if, after








                                      -18-
                                                                    Exhibit 10.4


giving effect to the distribution,  (1) the Company would not be able to pay its
debts as they  become due in the usual  course of business or (2) the total fair
market value of the assets of the Company would be less than the sum of its fair
market value of total liabilities.

         Section 13.3 Allocation of Distributions.  Distributions  shall be made
in  proportion  to the  Membership  Interests in the Company,  as of the date of
distribution, unless agreed otherwise by the unanimous vote of the Members.

         Section 13.4 Amounts not Withdrawn. If any Member does not withdraw the
whole or part of their share of any cash  distribution  made in accordance  with
this  Article  13, the Member  may not  receive  any  interest  thereon  and the
distribution  amount not withdrawn will become an optional capital  contribution
under Section 9.3 if permitted at that time.

         14.      RESTRICTIONS ON TRANSFER OF A MEMBER'S INTEREST
                  -----------------------------------------------

         Section 14.1  Conditions to Transfer.  Except as otherwise set forth in
this Agreement,  no Member shall have the right  voluntarily or involuntarily to
sell, assign,  pledge,  mortgage,  encumber or grant any security interest in or
otherwise  transfer all or any portion of any Membership  Interest,  and no such
purported  transfer  need  be  recognized  by  the  Company,  unless  all of the
following requirements are satisfied:

                  1. The transfer shall not of itself cause the Company to be in
default under any indebtedness of the Company;

                  2.  The  transfer  shall  not  violate  any  federal  or state
securities law;

                  3. The  Transferring  Member  shall  deliver to the  Company a
fully  executed  written  agreement  of  assignment  that  sets  forth the name,
address, and taxpayer identification number of the Transferee,  and the terms of
such transfer, provided such terms shall not conflict with any provision of this
Agreement; and

                  4. If any  Member  is a  closely  held  corporation,  or is an
unincorporated  association,  limited  liability  company  or  partnership,  the
transfer,  assignment  or  hypothecation  of  any  stock  or  interest  in  such
corporation,  association  or  partnership  in the  aggregate in excess of fifty
percent (50%) shall be deemed an  assignment  or transfer  within the meaning of
this Agreement, except as provided in Section 14.4 hereof.

         Section 14.2      Company's Unilateral Option to Purchase Interest.

                  1. The Company will have the unilateral  option to acquire the
Interest of a Member or Interest Holder if:

                           1.  any   Interest   Holder   acquires  a  Membership
Interest,  or  becomes  an  assignee,  as the  result of a court  order that the
Company is required by law to recognize;

                           2. a  Member's  Interest  is  subjected  to a  lawful
"charging order"; or


                                      -19-
                                                                    Exhibit 10.4


                           3.  a  Member  makes  an  unauthorized   transfer  or
assignment of a Membership  Interest that the Company is required by law (and by
a court order) to recognize.

                  2.  The  unilateral  option  to  acquire  the  Interest  of  a
Transferee  or  assignee  shall be  exercisable  upon the  following  terms  and
conditions:

                           1. The  Company  will have the option to acquire  the
interest by giving written notice to the Member,  Transferee or assignee that it
intends to purchase the interest  within  ninety (90) days from the event giving
rise to the Company's option. If this event is an event other than a transfer or
assignment,  the Company shall give written  notice within ninety (90) days from
the date of such event.  If this event is a transfer or assignment,  the Company
shall give written  notice  within  ninety (90) days from the date it is finally
determined that the Company is required to recognize the transfer or assignment.

                           2. The "Valuation  Date" for determining the Purchase
Price of the interest will be the first day of the month  following the month in
which notice of the unauthorized transfer is received.  The date notice is given
exercising  the  option,   as  determined  under  Section  19.3,  shall  be  the
"Determination Date".

                           3. The  Purchase  Price and Payment  Terms will be as
set forth in Section 14.5 and Section 14.6, respectfully.

                           4.  If   Newgold,   Inc.   has   made   the   Minimum
Contributions  required  by it at the  time of such  transfer  and it is not the
Member whose Membership Interest is being acquired, the Manager shall assign the
Company's option to purchase to Newgold,  Inc., or such other entity  designated
by  Newgold,  Inc.  When done so, any  rights or  obligations  imposed  upon the
Company will instead become, by substitution,  the rights and obligations of the
Members who are assigned the option.

                           5.  Neither  the   Transferee   nor  assignee  of  an
unauthorized  transfer  or  assignment  or the Member  causing  the  transfer or
assignment may vote on Company matters during the prescribed  option period.  If
the option to purchase is timely  exercised,  the  Transferee  shall have voting
rights only if admitted as a substitute Member.

         Section 14.3      Admission of Substitute Members.

                  1. No Transferee  shall become a substitute  Member unless the
following additional conditions are met:

                           1. The Transferee executes, acknowledges and delivers
to the Company a written  consent as required in Section 7.7, and executes  such
other  instruments as the Manager deem necessary or appropriate for admission as
a substitute Member; and

                           2. Each  Transferee  reimburses  the  Company for all
reasonable  accounting,  legal  and  other  expenses  incurred  by  the  Company
regarding the transfer and such




                                       -20-
                                                                    Exhibit 10.4


admission.

                  2. A  transferee  who  acquires  an  interest  in the  Company
without  complying with the  requirements  of this Article 14 shall not become a
substitute member, but shall have only those rights of a transferee set forth in
NRS ss.86.351.

                  3. In the event the sale, transfer,  assignment or encumbrance
is approved by  unanimous  written  consent of the  remaining  Members,  and the
remaining requirements of this Article 14 are satisfied, the Transferee shall be
admitted  to all the rights  and  powers of a Member,  and is subject to all the
restrictions and liabilities of the Transferring  Member.  However,  pursuant to
Nevada Revised Statutes Section 86.351, the Transferring  Member is not released
from liability to the Company.

         Section  14.4  Permitted  Transfers.  Any Member  may,  notwithstanding
Section 14.1 and Section  14.5,  without the  necessity  of  complying  with the
provisions  thereof,  transfer  all or  part  of the  Member's  Interest  in the
Company:

                  1. To the Company;

                  2.  To  any  other   existing   Member   (including,   without
limitation,  the vesting by right of survivorship of a Membership  Interest held
in joint tenancy upon the death of a deceased joint tenant); or

                  3.  If  Newgold,   Inc.  is  the  Transferring  Member,  to  a
corporation, limited partnership, limited liability company, or any other entity
as to which it owns more than 50% of the voting control of such entity.

         Section  14.5  Purchase  Price.  The  purchase  price to be paid for an
Interest  subject  to this  Agreement  shall  be  fair  market  value  as of the
Valuation Date, without taking into account any minority, marketability or other
valuation  discounts.  The  Valuation  Date  shall be the first day of the month
following the month in which the event requiring a determination of the purchase
price  occurs.  As defined  herein,  fair market  value shall be  determined  by
agreement of the respective parties or, in the event of inability to agree, by a
Qualified Appraiser selected by the Company.

         Section 14.6 Payment Terms. The consideration for an Interest purchased
by the Company or by one or more Members  under this Article 14 shall be paid to
the  Transferring  Member,  assignee  or  a  representative  or  successor  of a
Transferring  Member or  Assignee,  as the case may be, in  accordance  with the
following Payment Terms:

                  1.  Down  Payment.  A down  payment  in cash of not less  than
twenty  percent  (20%) of the  purchase  price  shall be paid within one hundred
eighty (180) days of the Determination Date, provided that if the purchase price
has not been  determined  within (180) days of the  Determination  Date the down
payment  shall become due and payable  thirty (30) days  following  the date the
purchase price is determined; and






                                      -21-
                                                                    Exhibit 10.4


                  2. Promissory Note. The balance of the purchase price shall be
paid  pursuant to the terms of a promissory  note (the "Note") to be executed by
the  Company.  The Note  shall  provide  for the  payment of a minimum of twenty
percent (20%) of the balance of the purchase price,  plus accrued  interest,  on
the first  anniversary date of the Note, and twenty percent (20%) of the initial
unpaid  principal  balance,  plus accrued  interest,  on each  anniversary  date
thereafter to and including the date of payment in full.  Interest  shall accrue
on the declining  principal  balance of the Note at the Default Interest Rate as
of the Determination  Date, and shall accrue from the date of the Note. The Note
shall be dated as of the date on which the down  payment is required to be made.
The Note  shall  provide  that its maker may  prepay  all or any  portion of the
unpaid principal balance and accrued interest at any time, without penalty.  The
Note shall provide that the entire unpaid principal balance of the Note, and all
accrued interest,  shall become due and payable  immediately upon the occurrence
of any of the following events:

                           1. Adjudication of bankruptcy of the Company;

                           2. Voluntary or involuntary  petition by or on behalf
of the  Company for  arrangement  or  reorganization  or for the  protection  of
creditors and the debtor, under bankruptcy law; or

                           3. Upon  default in payment or of any of the terms of
the Note.

         Section 14.7  Nonrecognition of an Unauthorized  Transfer.  The Company
will not be required to recognize the interest of any assignee or Transferee who
has obtained a purported Interest as the result of a transfer or assignment that
is not authorized by this  Agreement.  If there is a doubt as to ownership of an
Interest or who is entitled to Distributable Cash or liquidating  proceeds,  the
Manager may  accumulate  Distributable  Cash or  liquidation  proceeds until the
issue is resolved to the Manager' satisfaction.

         Section 14.8  Governmental  Approvals.  The Company shall apply for and
use its best efforts to obtain all  governmental  and  administrative  approvals
required,  if any,  in  connection  with the  purchase  and  sale of  Membership
Interests  under this  Agreement.  The Members shall cooperate in obtaining such
approvals  and to execute all  documents  that may be required to be executed by
the members in connection with such  approvals.  The Company shall pay all costs
and filing fees in connection with obtaining such approvals.

         15.      DISSOLUTION AND LIQUIDATION
                  ---------------------------

         Section 15.1   Events  Requiring  Dissolution.  The  Company  shall  be
dissolved only as specified in the Articles of Organization or as required under
applicable governing law.

         Section 15.2  Liquidation.  Upon the occurrence of any event  requiring
dissolution as set forth in the Articles of Organization, if the business of the
Company  is not  continued  as  allowed  in the  Articles  of  Organization,  if
applicable, the Manager of the Company shall execute and file with the Secretary
of State such  dissolution  documents  as are  required by law,  and the Company
shall  cease  to  carry  on its  business  and  shall  wind up its  affairs  and
liquidate.


                                      -22-
                                                                    Exhibit 10.4


         Section 15.3 Manager's Powers During  Liquidation.  During  liquidation
the Manager shall continue to have all managerial  powers necessary to carry out
their duties and functions in liquidation  the Company,  including the following
powers:

                  1. The power to continue to manage any Company business during
the  liquidation,  including the power to enter into  contracts  that may extend
beyond the liquidation;

                  2. The power to execute deeds, bills of sale, assignments, and
transfers  to convey  Company  property  to third  parties or to the  respective
Members  incident to finally  distributing  the remaining  Company  property (if
any). The Manager may not, however, impose personal liability upon any Member or
their legal  representatives  or  successors  in interest  under any warranty of
title contained in any instrument;

                  3. The power to borrow funds,  in the Manager' best  judgment,
reasonably  required to pay any  Company  obligations,  and to execute  security
documents   encumbering   Company   property  as  security  for  the   Company's
indebtedness.  The Manager may not, however,  create any personal obligation for
any Manager or any Manager's  successors-in-interest to repay indebtedness other
than from available proceeds from foreclosure or sales of Company property as to
which a lien is granted; and

                  4. The  power to  settle,  compromise,  or  adjust  any  claim
asserted to be owing by or to the Company and the right to file,  prosecute,  or
defend lawsuits and legal proceedings in connection with any matters.

         Section 15.4  Distribution  of Assets.  During the  liquidation  of the
Company,  the Members shall continue to share Net Profits and Losses in the same
proportions as before dissolution.  In settling accounts after dissolution,  the
proceeds  from the  liquidation  of the  Company's  assets  shall be  applied as
follows:

                  1. To  creditors  of the  Company,  including  Members who are
creditors, in the order of priority as provided by law, other than debts owed to
Members for their contributions;

                  2. To set up any reserves that the Manager may deem reasonably
necessary for any  contingent or unforeseen  liabilities  or  obligations of the
Company;

                  3. To the Members  with  respect to their share of profits and
other compensation; and

                  4. To the  Members  with  respect  to  their  capital  account
balances.

         Section 15.5 Gains or Losses.  During liquidation,  any gain or loss on
the  disposition  of the Company's  property shall be credited or charged to the
Members  in  accordance   with  the  provisions  of  Article  10.  Any  property
distributed  in kind in  liquidation  shall be valued and  treated as though the
property were sold for its fair market value and the cash proceeds  distributed.
The  difference  between the value of the property  distributed  in kind and its
book value to the Company  shall be treated as a gain or loss on the sale of the
property to be allocated

                                      -23-
                                                                    Exhibit 10.4


between the Members pursuant to Article 11.

         Section  15.6   Compliance   with  Timing   Requirements   of  Treasury
Regulation.  If the Company is  "liquidated"  within the meaning of  Regulations
Section  1.704-1(b)(2)(ii)(g),  distributions will be made under this Article to
the Members in accordance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).

         Section 15.7 Accounting.  Within a reasonable time after completing the
Company's  liquidation,  the  Manager  shall  supply to each  Member a statement
prepared by the Company's accountant that will set forth:

                  1. the Company assets and  liabilities  as of the  liquidation
date;

                  2. each Member's  portion of  distributions in accordance with
liquidation; and

                  3. the amount, if any, retained as reserves in accordance with
Section 15.4.

         Section  15.8 Rights of Lenders.  The rights and powers  granted to the
Manager  and Members are subject to the rights and powers of the holder of first
mortgage liens (if any) against any part of the property owned by the Company.

         16.      INDEMNIFICATION
                  ---------------

         Section 16.1 Indemnification of Member,  Employee or Agent:  Proceeding
Other than by Company.  The Company  shall  indemnify any person who was or is a
party  or is  threatened  to be  made a  party  to any  threatened,  pending  or
completed   action,   suit,   whether   civil,   criminal,   administrative   or
investigative,  except an action by or in the right of the Company, by reason of
the fact that he is or was an Organizer,  Member, Manager,  Officer, employee or
agent of this Company, or is or was serving at the request of this Company as an
organizer,   manager,   director,   officer,   employee   or  agent  of  another
limited-liability company or corporation, against expenses, including attorneys'
fees,  judgment,  fines and amounts paid in settlement  actually and  reasonably
incurred by him in connection with the action, suit or proceeding if he acted in
good faith and in a manner which he reasonably  believed to be in or not opposed
to the best interests of this Company, and, with respect to a criminal action or
proceeding,  had no reasonable  cause to believe his conduct was  unlawful.  The
termination of any action,  suit or proceeding by judgment,  order,  settlement,
conviction,  or upon a plea of nolo contendere or its  equivalent,  does not, of
itself,  create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of this Company, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.

         Section 16.2 Indemnification of Member,  Employee or Agent:  Proceeding
by Company.  The Company  shall  indemnify  any person who was or is party or is
threatened to be made a party to any threatened,  pending or completed action or
suit by or in the right of this  Company to  procure a judgment  in its favor by
reason of the fact that he is or was an  Organizer,




                                      -24-
                                                                    Exhibit 10.4


Member,  Manager,  Officer,  employee  or  agent of this  Company,  or is or was
serving  at the  request  of this  Company  as an  organizer,  member,  manager,
director,  officer,  employee  or agent of  another  limited-liability  company,
corporation,  partnership,  joint  venture,  trust or other  enterprise  against
expenses,  including amounts paid in settlement and attorneys' fees actually and
reasonably  incurred by him in connection  with the defense or settlement of the
actions  or suit if he acted in good faith and in a manner  which he  reasonably
believed  to be in or not  opposed  to  the  best  interests  of  this  Company.
Indemnification  may not be made for any claim, issue or matter as to which such
a  person  has  been  adjudged  by a  court  of  competent  jurisdiction,  after
exhaustion of all appeals therefrom, to be liable to this Company or for amounts
paid in settlement to this Company, unless and only to the extent that the court
in which the action or suit was brought or other court of competent jurisdiction
determines upon application  that in view of all the  circumstances of the case,
the person is fairly and  reasonably  entitled to indemnity for such expenses as
the court deems proper.

         Section  16.3  Advance of  Expenses.  Expenses  incurred in defending a
civil or criminal action,  suit or proceeding  brought other than by the Company
shall be paid by the  Company in advance  until the  earlier to occur of (a) the
final disposition of the action, suit or proceeding in the specific case, or (b)
a  determination  that  indemnification  is not proper  under the  circumstances
because the applicable  standard of conduct set forth in this Article 16 has not
been met.  Expenses  incurred in defending a civil or criminal  action,  suit or
proceeding  brought by the  Company may be paid by the Company in advance of the
final  disposition  of the action,  suit or  proceeding,  as  authorized  by the
Company  pursuant to Section 16.4 in the specific  case. Any advance of expenses
shall not  commence  until  receipt by the  Company of an  undertaking  by or on
behalf of the  individual  seeking  such  advance to repay any  advanced  amount
unless it shall  ultimately be determined that such individual is entitled to be
indemnified by the Company as authorized in this Article 16.

         Section 16.4  Determination  of  Indemnification.  Any  indemnification
under  Sections  16.1 and 16.2,  unless  ordered by a court or  advanced  by the
Company,  must be made by this Company only as  authorized  in the specific case
upon a determination  that  indemnification of the Organizer,  Member,  Manager,
Officer,  employee or agent is proper in the  circumstances.  The  determination
must be made:

                  1. By the  Manager  who were not  parties to the act,  suit or
proceeding; or

                  2. If a quorum  consisting  of Manager who were not parties to
the act,  suit or proceeding  cannot be obtained,  by a majority of the Members,
disregarding  the vote of any Member or Manager who was a party to the act, suit
or proceeding.

         Section   16.5   Cooperation   of   Indemnitee.   Any  person   seeking
indemnification pursuant to this Article 16 shall promptly notify the Company of
any action, suit or proceeding for which  indemnification is sought and shall in
all ways  cooperate  fully with the  Company and its  insurer,  if any, in their
efforts  to  determine  whether  or  not   indemnification   is  proper  in  the
circumstances,  given  the  applicable  standard  of  conduct  set forth in this
article. Any person seeking indemnification  pursuant to this article other than
with respect to (a) a criminal  action,  suit, or proceeding,  or (b) an action,
suit,  or  proceeding  by or in the  right of the  Company,  shall

                                      -25-
                                                                    Exhibit 10.4


(i) allow the  Company  and/or its  insurer  the right to assume  direction  and
control of the defense  thereof,  if they elect to do so, including the right to
select or approve defense counsel, (ii) allow the Company and/or its insurer the
right to settle such actions,  suits,  or proceedings at the sole  discretion of
the Company and/or its insurer,  and (iii)  cooperate fully with the Company and
its  insurer  in  defending  against,  and  settling  such  actions,  suits,  or
proceedings.

         Section  16.6  Non-Exclusivity.  The  indemnification  provided by this
Article  16 shall not be deemed  exclusive  of any other  rights to which  those
seeking  indemnification  may  be  entitled  under  the  Act,  the  Articles  of
Organization  or this Agreement or any agreement,  vote of Members or otherwise,
both as to action in an official  capacity and as to action in another  capacity
while holding such office,  and shall  continue as to a person who has ceased to
be a Member,  officer,  employee  or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.

         Section 16.7 Insurance. The Company may purchase and maintain insurance
on behalf of any person who is or was an Organizer,  Manager,  Member,  officer,
employee,  or agent of the  Company,  or is or was serving  the  Company  with a
contractual  commitment of indemnification,  or is or was serving at the request
of the Company as an organizer,  member, manager, director, officer, employee or
agent of another limited  liability  company,  corporation,  partnership,  joint
venture,  trust or other enterprise  against any liability asserted against such
person  and  incurred  by him or her in any such  capacity,  or  arising  out of
his/her  status as such,  whether  or not the  Company  would  have the power to
indemnify him or her against such liability  under the provisions of the Act, as
amended from time to time.

         Section  16.8  Additional  Indemnification.  The  Company  may  provide
further indemnity,  in addition to the indemnity provided by this Article 16, to
any  person  who is or was an  Organizer,  Manager,  Member  or  officer  of the
Company,  or is or was serving  the Company  with a  contractual  commitment  of
indemnification,  or is or was  serving  at the  request  of the  Company  as an
organizer,  member,  manager,  director,  officer,  employee or agent of another
limited liability company,  corporation,  partnership,  joint venture,  trust or
other  enterprise,  provided that no such indemnity  shall  indemnify any person
from or on account of such person's  conduct which was finally  adjudged to have
been knowingly fraudulent, deliberately dishonest, or willful misconduct.

         17.      COMPANY RECORDS AND REPORTS
                  ---------------------------

         Section 17.1 Books and Records.  The Manager shall cause the Company to
keep the following:

                  1.  Complete  books and  records of account in which  shall be
entered fully and accurately all  transactions and other matters relating to the
Company.  The  Company's  books and records  shall be kept on an accrual  basis,
except as the Manager may otherwise determine to be permitted under the Code;







                                      -26-
                                                                    Exhibit 10.4


                  2. A current list of the full name and last known  business or
residence  address of each Member set forth in  alphabetical  order  listing the
Member's capital contribution to the Company and Interests owned;

                  3. A current list of the full name and last known  business or
residence of each Manager set forth in alphabetical order;

                  4. A copy of the filed Articles of Organization  and all filed
amendments thereto and all filings by the Company in Nevada and other states;

                  5.  Copies of any  powers of  attorney  pursuant  to which any
document in (c), above has been executed;

                  6. Copies of the then  effective  operating  agreement  of the
Company; and

                  7. Any and all records requested to be kept for any statutory,
regulatory or other applicable law.

                  All  such  books  and  records  shall  be  maintained  at  the
principal  executive  office  of the  Company,  and as to  those  designated  in
Subparagraphs (b) through (f) above, inclusive, also at the registered office of
the Company.  In each  location,  such books and records  shall be available for
inspection  and copying by, and at the  expense of, the  Members,  or their duly
authorized representatives, during reasonable business hours.

         18.      ALTERNATIVE DISPUTE RESOLUTION
                  ------------------------------

         Section 18.1 Agreement to Use  Procedure.  The Members and Manager have
entered into this  Agreement in good faith and in the belief that it is mutually
advantageous  to them.  It is with that same  spirit  of  cooperation  that they
pledge to attempt to resolve  any dispute  amicably  without  the  necessity  of
litigation.  Accordingly, they agree if any dispute arises between them relating
to this  Agreement  (the  "Dispute"),  they will first  utilize the  alternative
dispute  resolution  ("ADR")  procedures  specified  in  this  Article  18  (the
"Procedure") before any Additional Proceedings.

         Section 18.2 Initiation of Procedure.  The Manager or Member seeking to
initiate the Procedure (the "Initiating  Party") will give written notice to the
other Manager and Members.  The notice must describe in general terms the nature
of the Dispute and the Initiating  Party's claim for relief.  Additionally,  the
notice  must  identify  one or more  individuals  with  authority  to settle the
Dispute on the Initiating  Party's behalf.  The Manager or Members receiving the
notice (the "Responding  Party" whether one or more) will have five (5) business
days within which to designate by written notice to the Initiating Party, one or
more individuals with authority to settle the Dispute on the Responding  Party's
behalf.  The  individuals  so  designated  will  be  known  as  the  "Authorized
Individuals."  The  Responding  Party may  authorize  himself  or  herself as an
Authorized  Individual.  The  Initiating  Party and the  Responding  Party  will
collectively  be  referred  to  as  the  "Disputing   Parties"  or  individually
"Disputing Party."





                                      -27-
                                                                    Exhibit 10.4


         Section  18.3  Direct  Negotiations.  The  Authorized  Individuals  may
investigate  the Dispute as they deem  appropriate.  But they agree to promptly,
and in no event  later  than  thirty  (30) days from the date of the  Initiating
Party's written notice, meet to discuss the Dispute's resolution. The Authorized
Individuals will meet at the times and places and with the frequency as they may
agree.  If the Dispute has not been resolved  within thirty (30) days from their
initial meeting date, the Disputing  Parties will cease direct  negotiations and
will submit the Dispute to mediation in accordance with the following procedure.

         Section 18.4 Mediator Selection.  The Authorized  Individuals will have
five (5) business days from the date they cease direct negotiations to submit to
each  other  a  written  list of  acceptable  qualified  attorney-mediators  not
affiliated  with any  Manager or Member.  Within five (5) days from the date the
list is  received,  the  Authorized  Individuals  will  rank  the  mediators  in
numerical  order of preference  and exchange the rankings.  If one or more names
are on  both  lists,  the  highest  ranking  person  will be  designated  as the
mediator.  If no mediator has been selected under this procedure,  the Disputing
Parties  agree  jointly to request a State or  Federal  District  Judge of their
choosing to supply within ten (10)  business days a list of potential  qualified
attorney-mediators.  If they  cannot  agree upon a State or Federal  Judge,  the
Chief  State  Judge for the county in which the  Company's  principal  office is
located  may supply the list.  Within five (5)  business  days from the date the
list is  received,  the  Authorized  Individuals  will again  rank the  proposed
mediators in numerical order of preference and will simultaneously  exchange the
list and will  select as the  mediator  the  individual  receiving  the  highest
combined  ranking.  If the mediator is not available to serve, they will proceed
to contact the mediator  who was next highest in ranking  until they are able to
select a mediator.

         Section  18.5  Mediation  Time  and  Place.  In  consultation  with the
mediator selected, the Authorized Individuals will promptly designate a mutually
convenient  time and  place  for the  mediation.  Unless  circumstances  require
otherwise,  the time for  mediation may not be later than  forty-five  (45) days
after selecting the mediator.

         Section  18.6  Information  Exchange.  If any  Disputing  Party to this
Agreement has  substantial  need for  information in another  Disputing  Party's
possession in order to prepare for the  mediation,  all  Disputing  Parties will
attempt in good  faith to agree to  procedures  to  expeditiously  exchange  the
information, with the mediator's help if required.

         Section 18.7 Summary of Views. At least seven (7) days before the first
scheduled  mediation session,  each Disputing Party will deliver to the mediator
and to the other Disputing Parties a concise written summary of its views on the
matter in Dispute and the other matters  required by the mediator.  The mediator
may also request that a confidential  issue paper be submitted by each Disputing
Party to him or her.

         Section  18.8  Parties  to  be  Represented.  In  the  mediation,  each
Disputing  Party will be  represented  by an  Authorized  Individual  and may be
represented  by  counsel.  In  addition,  each  Disputing  Party  may,  with the
mediator's  permission,  bring the  additional  Persons  as needed to respond to
questions, contribute information, and participate in the negotiations.




                                      -28-
                                                                    Exhibit 10.4


         Section 18.9      Conduct of Mediation.

                  1. The mediator  will  determine  the format for the meetings.
The format must be designed to assure that:

                           1. Both the mediator and the  Authorized  Individuals
have an opportunity to hear an oral presentation of each Disputing Party's views
on the matter in dispute; and

                           2. The  authorized  parties  attempt to  negotiate to
resolve the matter in  dispute,  with or without  the  assistance  of counsel or
others, but with the mediator's assistance.

                  2. The mediator is authorized  to conduct both joint  meetings
and separate private caucuses with the Disputing Parties.  The mediation session
will be private.  The mediator will keep confidential all information learned in
private caucus with any Disputing  Party unless  specifically  authorized by the
Disputing Party to disclose the information to the other  Disputing  Party.  The
Disputing  Parties commit to  participate in the  proceedings in good faith with
the intention of resolving the Dispute, if at all possible.

         Section 18.10     Termination of Procedure.

                  1.  Procedure to Terminate  Mediation.  The Disputing  Parties
agree to participate in the mediation procedure to its conclusion. The mediation
will be terminated by:

                           1. Executing a settlement  agreement by the Disputing
Parties;

                           2.  Declaring to the mediator  that the  mediation is
terminated; or

                           3. A Disputing  Party  declaring  in writing that the
mediation  process  is  terminated  when one full  day's  mediation  session  is
concluded.

                  2. Even if the mediation is  terminated  without the Dispute's
resolution, the Disputing Parties agree not to terminate negotiations and not to
commence any Additional Proceedings before five (5) days following the mediation
expire. Any Disputing Party may, however, commence Additional Proceedings within
the five (5) day period if the Dispute could be barred by an applicable  statute
of limitations.

         Section 18.11  Arbitration.  The parties agree to  participate  in good
faith in the ADR to its conclusion.  If the Disputing Parties are not successful
in resolving the dispute through the ADR, then the Disputing  Parties agree that
the dispute will be settled by  arbitration  in accordance  with the  Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award  rendered  by  the   arbitrators  may  be  entered  in  any  court  having
jurisdiction ("Additional Proceedings").

         Section 18.12 Mediation Fees; Disqualification. The mediator's fees and
expenses will be shared equally by the Disputing  Parties.  The mediator will be
disqualified  as a witness,


                                      -29-
                                                                    Exhibit 10.4


consultant,  expert,  or counsel  for any  Disputing  Party with  respect to the
Dispute and any related matters.

         Section 18.13  Confidentiality.  Mediation is a compromise  negotiation
for purposes of Federal and State Rules of Evidence and  constitutes  privileged
communication  under Nevada law. The entire  mediation  process is confidential,
and no  stenographic,  visual,  or  audio  record  will be  made.  All  conduct,
statements, promises, offers, views, and opinions, whether oral or written, made
in the  mediation's  course by any Disputing  Party,  their  agents,  employees,
representatives or other invitees and by the mediator are confidential and will,
in  addition  and  where  appropriate,   be  deemed  privileged.   The  conduct,
statements,  promises,  offers,  views, and opinions will not be discoverable or
admissible for any purpose,  including  impeachment,  in any litigation or other
proceeding  involving the parties,  in accordance  with Nevada Revised  Statutes
Section 48.109. It will not be disclosed to anyone who is not a Manager, Member,
or their agent, employee, expert, witness, or representative. Evidence otherwise
discoverable or admissible is not, however, excluded from discovery or admission
as a result of its use in the mediation.

         19.      MISCELLANEOUS PROVISIONS
                  ------------------------

         Section 19.1 Agreement to Perform Necessary Acts. Each Member agrees to
perform any further  acts and  execute  and  deliver any  documents  that may be
reasonably necessary to carry out the provisions of this Agreement.

         Section 19.2  Amendments.  This Agreement may be modified or amended at
any time and from time to time as follows:

                  1.  Amendments to this  Agreement may be proposed by a Manager
or by  Members  holding  ten  percent  (10%)  or  more  of the  Company's  total
Membership Interests.  Following such proposal,  the Manager shall submit to the
Members a verbatim  statement of any proposed  amendment,  and the Manager shall
include in any such submission a  recommendation  as to the proposed  amendment.
The Manager shall seek the written vote of the Members on the proposed amendment
or shall call a meeting to vote thereon and to transact any other  business that
it may deem  appropriate  in  accordance  with this  Agreement.  For purposes of
obtaining a written vote, the Manager may require  response  within a reasonable
specified  time,  but not less than fifteen (15) days, and failure to respond in
such time period shall  constitute a vote which is  consistent  with the Manager
recommendation  with  respect to the  proposal.  A proposed  amendment  shall be
adopted and be effective as an amendment  hereto if it receives the  affirmative
vote or  written  consent  of  Members  holding  a  majority  of the  Membership
Interests.

                  2. Notwithstanding the foregoing,  this Agreement shall not be
amended without the consent of each Member adversely  affected if such amendment
would modify the limited liability of a Member or alter the Interest of a Member
in Profits and Losses, or any Company distributions.

         Section 19.3 Notices. All notices or other  communications  required or
permitted to be given under this Agreement  shall be in writing and shall be (a)
delivered  personally,  (b) sent via Federal Express (or via another  comparable
overnight  messenger  service),  or (c) mailed,  certified



                                      -30-
                                                                    Exhibit 10.4


or registered  mail,  return  receipt  requested,  to the parties  hereto at the
addresses  set  forth in  relation  to the  signature  lines of this  Agreement.
Personally-delivered notices shall be deemed given upon actual personal delivery
to the  intended  recipient.  Notices  sent via Federal  Express (or via another
comparable  overnight  messenger  service) shall be deemed given on the business
day  immediately  following the day of dispatch.  Mailed notices shall be deemed
given upon the earliest of three (3) business days after deposit into the United
States Mail registered or certified, with postage fully-prepaid,  or the date of
actual receipt as evidenced by the return receipt. Notices and communications to
Newgold and ASDi LLC will,  unless another  address is specified in writing,  be
sent to the addresses below:

                  Notices to Newgold:
                  400 Capitol Mall, Suite 900
                  Sacramento, CA 95814
                  Attention: James W. Kluber
                  Telecopy: 916-449-8259

                  Notices to ASDi LLC:
                  400 Capitol Mall, Suite 900
                  Sacramento, CA 95814
                  Attention: A. Scott Dockter
                  Telecopy: 916-449-8259


         Section 19.4 Binding  Effect.  Subject to the provisions  hereof,  this
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their  respective  successors  and  assigns.  The parties  hereto  agree for
themselves  and for  their  successors  and  assigns,  and their  successors  in
interest,  no matter how such succession in interest is acquired, to execute any
instrument  that may be necessary or proper to carry out all of the purposes and
intentions of this  Agreement.  The Membership  Interest of any successor to any
party  hereto  that is not also a party  hereto  shall be treated  hereunder  as
though it has  continued  and is  continuing to be held by such party hereto for
the purposes of  determining  the priorities of the rights of the parties hereto
to purchase such Membership Interest under the terms of this Agreement.

         Section  19.5  Severability.  If any  sentence,  paragraph,  clause  or
combination  of the  same in this  Agreement  is  held by a court  of  competent
jurisdiction to be unenforceable in any jurisdiction,  such sentence, paragraph,
clause or combination shall be unenforceable in the jurisdiction  where it is so
held,  and the remainder of this  Agreement  shall remain binding on the parties
hereto in such  jurisdiction  as if such  unenforceable  provision  had not been
contained  herein.  The  enforceability of such sentence,  paragraph,  clause or
combination  of the same in this  Agreement  otherwise  shall be unaffected  and
shall remain enforceable in all other jurisdictions.

         Section 19.6 Governing Law. The validity, construction,  interpretation
and  enforceability  of this  Agreement  shall be determined and governed by the
laws of the State of Nevada. Notwithstanding the foregoing, if any law or set of
laws in the State of Nevada  requires  or  otherwise  dictates  that the laws of
another state or jurisdiction  must be applied in any proceeding  involving this
Agreement,  such Nevada law or set of laws shall be  superseded  by this




                                      -31-
                                                                    Exhibit 10.4


Section  and the  remaining  laws of the  State of Nevada  nonetheless  shall be
applied in such proceeding.

         Section 19.7  Foreign  Qualification.  Before the Company  qualifies to
conduct business in any jurisdiction  other than Nevada,  the Manager will cause
the Company to comply,  to the extent procedures are available and those matters
are reasonably within the Manager' control,  with all requirements  necessary to
qualify the Company as a foreign limited liability company in that jurisdiction.
At the Manager' request,  each Member will execute,  acknowledge,  swear to, and
deliver any and all  certificates  and other  instruments  conforming  with this
Agreement's  terms that are necessary or appropriate to qualify,  continue,  and
terminate  the  Company  as  a  foreign   limited   liability   company  in  all
jurisdictions in which the Company may conduct business..

         Section 19.8 Federal Law  Disclosure  and  Limitations.  The Membership
Interests  have not been  registered  under  federal or state  securities  laws.
Membership  Interests may not be offered for sale, sold,  pledged,  or otherwise
transferred  unless so  registered,  or unless an  exemption  from  registration
exists.  The availability of any exemption from registration must be established
by an opinion of counsel, whose opinion must be satisfactory to the Manager.

         Section 19.9      Tax Matters.

                  1. The Members acknowledge that the Company will be treated as
a  "partnership"  for federal  income tax purposes,  and will be governed by the
applicable provisions of Subchapter K, of Chapter 1 of the Code, as amended. All
provisions  of this  Agreement  shall be  construed  so as to preserve  that tax
status.

                  2. Within  ninety (90) days after the end of each Fiscal Year,
the Manager  will cause to be  delivered  to each person who was a Member at any
time during such Fiscal Year a Form K-1 and such other information, if any, with
respect to the Company as may be necessary for the  preparation of each Member's
federal or state  income tax (or  information)  returns,  including  a statement
showing each Member's share of income,  gain or loss, and credits for the Fiscal
Year.

                  3. The Manager will designate a Member to act on behalf of the
Company as the "tax matters partner" within the meaning of Section 6231(a)(7) of
the Code. The Company shall indemnify and reimburse the Member designated as the
tax matters partner for all reasonable expenses,  including legal and accounting
fees,  claims,  liabilities,  losses and damages incurred in connection with any
administrative  or judicial  proceeding with respect to the tax liability of the
Members. The payment of all such expenses shall be made before any distributions
are made to the Members hereunder, and before any discretionary reserves are set
aside by the Manager.  The taking of any action and the incurring of any expense
by the Member  designated as the tax matters partner in connection with any such
proceeding,  except  to the  extent  required  by law,  is a matter  in the sole
discretion of such Member,  and the provisions  hereof limiting the liability of
and providing  indemnification  for the Manager shall be fully applicable to the
Member designated as the tax matters partner in his capacity as such.






                                      -32-
                                                                    Exhibit 10.4


         Section  19.10  Counterparts.  This  Agreement  may be  executed in any
number of  counterparts  and each such  counterpart  shall for all  purposes  be
deemed an original,  and all such counterparts shall together constitute but one
and the same  instrument.  Any signature  page of this Agreement may be detached
from any counterpart  without impairing the legal effect of any signatures,  and
may be attached to another  counterpart,  identical in form, but having attached
to it one or more additional  signature pages. This agreement may be executed by
signatures  provided by electronic  facsimile  transmission (also known as "fax"
copies),  which  facsimile  signatures  shall be as  binding  and  effective  as
original signatures.

         Section 19.11 Headings,  Gender and Number.  Headings in this Agreement
are included  herein for the convenience of reference only and shall not define,
limit,  or otherwise  constitute a part of this Agreement for any other purpose.
Whenever  required by the context of this Agreement,  the singular shall include
the plural and the plural shall include the singular. The masculine feminine, or
neuter  genders  shall each include the others.  All  references  to a period of
days,  months or years  herein  shall refer to calendar  days,  months or years,
respectively, unless otherwise specifically stated.

         Section 19.12 Construction.  The terms and conditions of this Agreement
shall be construed  as a whole  according to their fair meaning and not strictly
for or against any party. The parties acknowledge that each of them has reviewed
this Agreement and has had the opportunity of having their attorneys review this
Agreement.  The normal rule of  construction  to the effect that any ambiguities
are to be  resolved  against  the  drafting  party  shall not be employed in the
interpretation of this Agreement or of any of its exhibits or amendments.

         Section  19.13  Waiver.  No waiver of any  breach  of  default  of this
Agreement by any party hereto  shall be  considered  to be a waiver of any other
breach or default of this Agreement.

         Section  19.14  Attorney's  Fees.  If any  party  brings  an  action or
proceeding (including any cross-complaint,  counterclaims, or third-party claim)
against any other  party by reason of a default by the other party or  otherwise
arising  out of  this  Agreement,  the  non-prevailing  party  shall  pay to the
prevailing  party in such action or  proceeding  all of the  prevailing  party's
costs and expenses of suit  (including  the costs and expenses of enforcing  any
judgment or settlement),  including  reasonable  attorney's fees, which shall be
payable whether or not such action is prosecuted to judgment. "Prevailing party"
within the  meaning of this  Section  19.14  includes a party who  dismisses  an
action for recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants  allegedly  breached,  or  consideration  substantially
equal to the relief sought in the action.

         Section 19.15 Creditors. No provision of this Agreement will be for the
benefit  of or  enforceable  by any  creditors  of the  Company  or other  third
parties.

         Section  19.16  Offset.  Whenever  the Company is to pay any sum to any
Member,  any amounts that Member owes the Company may be deducted  from that sum
before payment.

         Section 19.17 Disclosure. Each Member and Manager acknowledges that he,
she, or it:


                                      -33-
                                                                    Exhibit 10.4



                  1. was urged in  advance by the  Attorney  who  prepared  this
Agreement  to secure  separate  independent  legal  counsel in  connection  with
signing  and making  this  Agreement  and its effect upon each of them and their
marital property;

                  2. has carefully read and understood this Agreement;

                  3. understands that his or her marital rights in real property
may be adversely affected by this Agreement;

                  4. is signing and making this Agreement voluntarily;

                  5. has been provided a fair and  reasonable  disclosure of the
property and financial obligations of the Company; and

                  6.  voluntarily and expressly waives in this writing any right
to  disclosure  of the nature and extent of any Company  property and  financial
obligations,  and the other Member's assets and financial obligations beyond the
disclosure provided.

         Section 19.18  Complete  Agreement.  This Agreement and the Articles of
Organization  constitute the complete and exclusive  statement among the Members
and Manager with respect to the subject matter contained therein. This Agreement
and the Articles of Organization supersede all prior agreements by and among the
Members and Manager.

         20.      DEFINITIONS
                  -----------

                  Capitalized  words and phrases  used in this  Agreement  shall
have the following meanings:

         Section 20.1 The Act: "The Act" shall mean Chapter 86 of Nevada Revised
Statutes, or any corresponding provisions of succeeding law.

         Section 20.2 Additional  Proceedings:  "Additional  Proceedings"  shall
have the meaning set forth in Section 18.11.

         Section 20.3 Agreement:  "Agreement" means this Operating  Agreement as
amended from time to time.

         Section 20.4 Code:  "The Code" shall mean the Internal  Revenue Code of
1986,  as  amended  from  time  to  time,  or any  corresponding  provisions  of
succeeding law.

         Section  20.5  Company:  "Company"  shall  mean the  limited  liability
company governed under this Agreement, as constituted or amended.

         Section 20.6 Default Interest Rate:  "Default  Interest Rate" means the
rate per annum equal to the Wall Street Journal prime rate as quoted in the Wall
Street  Journal's money rates section,  which is also the base rate on corporate
loans at large  United  States  money  center




                                      -34-
                                                                    Exhibit 10.4


commercial  banks, as its prime commercial or similar  reference  interest rate,
with adjustments to be made on the same date as any change in the rate.

         Section 20.7 Delinquent Member:  "Delinquent Member" means a Member who
fails to make a required capital contribution under Article 9.

         Section 20.8 Determination Date: "Determination Date" means the date on
which  notice is given to  purchase an Interest  under  Section  14.2 or Section
14.5.

         Section 20.9  Dispute:  "Dispute"  means a dispute among the Members or
Manager,  or between one or more Members and one or more Manager,  arising under
this Agreement.

         Section 20.10  Distributable Cash:  "Distributable  Cash" means, at the
time of  determination  for any period (on the cash  receipts and  disbursements
method  of  accounting),  all  Company  cash  derived  from the  conduct  of the
Company's business,  including distributions from entities owned by the Company,
cash from operations or investments, and cash from the sale or other disposition
of Company property, other than:

                  1. capital  contributions  with  interest  earned  pending its
utilization;

                  2. financing or other loan proceeds;

                  3. reserves for working capital; and

                  4. other amounts that the Manager  reasonably  determine needs
to be retained by the Company in accordance with the Manager' discretion.

         Section 20.11 Effective Date: "Effective Date" means the effective date
of this Agreement as determined under Article 1.

         Section 20.12 Initiating  Party:  "Initiating  Party" means a Member or
Manager who initiates  alternative  dispute resolution  procedures under Article
18.

         Section 20.13 Interest:  "Interest" means a Membership  Interest or the
interest of an assignee upon the transfer of a Membership  Interest  without the
Transferee's being admitted to the Company as a Member. The owner of an Interest
shall have the right to an  allocative  share of the  economic  benefits  of the
Company,  including Net Profits, Net Losses, and distributions.  With respect to
Members, an Interest shall also include the right to vote on matters as to which
the Agreement  requires or permits Members to vote. A Transferee or assignee who
is not admitted as a substitute Member shall have no voting rights.

         Section 20.14 Interest  Holder:  "Interest  Holder" means the holder of
any Interest or Membership Interest in the Company.

         Section  20.15  Lending  Member:  "Lending  Member"  means a Member who
advances all or any portion of a Delinquent  Member's capital  contribution that
is in default.




                                      -35-
                                                                    Exhibit 10.4


         Section  20.16  Manager:   "Manager"  means  the  Member,  Members,  or
Nonmember(s)  who are referred to as the Manager(s) in Article 5 hereof,  or any
successor or successors thereto.

         Section  20.17  Member:  "Member"  means  any  holder  of a  Membership
Interest in the  Company  who has become a Member  pursuant to the terms of this
Agreement,  but does not  include an  Assignee  who has not become a  substitute
Member.

         Section 20.18 Membership Interest: "Membership Interest" shall mean the
respective right of a Member to an allocative share of the economic  benefits of
the Company, including Net Profits, Net Losses, and distributions, in accordance
with the  percentage  interests  set forth at  Section  9.2 and with  respect to
Members,  the right to vote on matters  as to which the  Agreement  requires  or
permits Members to vote.

         Section  20.19  Net  Losses:  "Net  Losses"  means  the net loss of the
Company, computed in accordance with Code Section 703, applied consistently with
prior periods.

         Section 20.20 Net Profits:  "Net  Profits"  means the net income of the
Company, computed in accordance with Code Section 703, applied consistently with
prior periods.

         Section  20.21  Qualified  Appraiser:  "Qualified  Appraiser"  means an
appraiser who is qualified to perform business  appraisals of limited  liability
companies and ownership interests therein.

         Section  20.22  Payment  Terms:  "Payment  Terms"  means  the terms for
payment of an  Interest  acquired by the  Company or one or more  Members  under
Article 14, as set forth in Section 14.7.

         Section  20.23  Procedure:   "Procedure"  means   alternative   dispute
resolution procedures as set forth in Article 18.

         Section 20.24 Purchase Price:  "Purchase Price" means the price for the
acquisition  of an Interest by the Company or one or more Members  under Article
14, as set forth in Section 14.6.

         Section 20.25  Regulations:  "Regulations"  shall mean the  regulations
issued by the U.S. Treasury Department under the Code.

         Section 20.26 Responding  Party:  "Responding  Party" means a Member or
Manager responding to alternative dispute resolution  procedures initiated by an
Initiating Party.

         Section 20.27 Transferee:  "Transferee"  means a third person or entity
to whom a Transferring Member sells, transfers, encumbers, assigns, or otherwise
disposes of all or any part of the Member's Interest in the Company.

         Section 20.28 Transferring Member: "Transferring Member" means a Member
who voluntarily sells, transfers,  encumbers,  assigns, or otherwise disposes of
all or any part of the  Member's  Interest in the Company to any third person or
entity.



                                       -36-
                                                                    Exhibit 10.4


         Section  20.29  Valuation  Date:  "Valuation  Date"  means the date for
determining  the value of an  Interest  to be  acquired by the Company or one or
more Members under Article 14.




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                                      -37-
                                                                    Exhibit 10.4


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Operating Agreement as of the ninth day of February, 2006.


                                  Acceptance and Approval By Members:

                                  NEWGOLD, INC.


                                  By: /s/ JAMES W. KLUBER
                                     -------------------------------------------
                                     James W. Kluber
                                     Its: Chief Financial Officer

                                  ASDi LLC


                                  By: /s/ A. SCOTT DOCKTER
                                     -------------------------------------------
                                     A. Scott Dockter
                                     Its: Manager




                                  Acceptance and Approval By Manager:

                                  NEWGOLD, INC.


                                  By: /s/ JAMES W. KLUBER
                                     -------------------------------------------
                                     James W. Kluber
                                     Its: Chief Financial Officer























                                      -38-
                                                                    Exhibit 10.4


           Exhibit A to Operating Agreement of Crescent Red Caps, LLC
                                  Mining Claims























































                                      -39-
                                                                    Exhibit 10.4


           Exhibit B to Operating Agreement of Crescent Red Caps, LLC
        Red Caps Lease Agreement between ASDi LLC and Sam Bida, the Leon
                   Belaustegui Trust, et al dated May 16, 2003





















































                                      -40-
                                                                    Exhibit 10.4


           Exhibit C to Operating Agreement of Crescent Red Caps, LLC
     Crescent Valley Lease Agreement between ASDi LLC and Sam Bida, the Leon
                Belaustegui Trust, et al dated September 3, 2003






















































                                      -41-
                                                                    Exhibit 10.4